Guinness ‘ups the spread’ on £250m bond to hit 4% coupon

The 30-year bonds, with £100m retained, priced on October 16 2014, achieving a spread of 130 bps and coupon of 4 per cent - one of the sector’s most competitive coupons for 30-year money.

Chief executive Simon Dow said: ‘We were moving into quite a turbulent market, with the gilt yield coming down quite sharply and thought that a number of investors might want to sit on their hands, so we upped the spread on offer to get them back into the market.

‘With the collapse in the equity markets and everybody moving across to the higher quality borrowers and the gilt yield coming down dramatically, there was some concern, and we [Guinness] felt we were ready to go.’

Allocations were made to 13 individual investors, after 17 orders and the bonds being 2.3x oversubscribed. It was priced over the 4.5% 2042 reference gilt.

Mr Dow added: ‘RBS did some work on what would have happened if we went out 24 hours later, and we would have pushed the spread down but the gilt yield had gone up 10 to 20 bps. There’s always a degree of luck in these things, but we had done a huge amount of work.’

The group has converted a number of existing banking arrangements into revolving credit facilities and will use the bond to pay them down before drawing again for development.

The group’s targets include 2,700 new homes under the 2011-15 AHP, and another 1,500 new homes in the 2015-2018 programme.

The bond issuance came in the same month that Guinness posted a net surplus of £92.1m for 2013/14, of which £65.3m was from sales.

Guinness delivered 730 homes in 2013/14, invested £47.6m in existing properties and transferred 876 Guinness Hermitage homes out of the group to other RPs to raise funds to invest in its core areas.

Stock rationalisation has amounted to 1,300 sales over several years generating £86.4m.

The HA had been assigned an A1 rating by Moody’s, along with an AA- rating from Standard and Poor’s. Moody’s highlighted the ‘fundamental credit quality’ and pointed to ‘growing revenue diversification’ into market rent and outright sales.

Mr Dow said 91 per cent of income is from social housing activities, with gearing of 53 per cent and debt per unit at £15,500. He said the group stressed to investors that there is ‘nothing in our sales or market rent programme that is essential to our business plan’.

The latest rating for the secured bonds represents an upgrade to A1 from A2, which was assigned to the group’s 1995 secured bonds. They were backed by Assured Guaranty through an insurance ‘wrap’, which has since featured on PFI schemes.