HA secures £165m in combined UK bond and US private placement deal

The deal is understood to mark the first time that a UK HA has raised funds from both the public bond and private placement markets simultaneously.

The 4,800 units HA issued a £75m bond maturing in 2059, with another £75m retained, and a £15m US private placement maturing in 2029. The money will be used for refinancing and development.

It attracted bids for £325m and was finally placed with four investors via treasury vehicle Boston Mayflower Finance.

The debt has been raised at an all-in cost of 4.28% and margin of 130 bps over the respective reference gilts, with a coupon of 4.321% on the bond and 4.077% on the private placement. The funding was priced over the 2055 and 2030 gilts.

Canaccord Genuity lead managed and Russell Crowther Consultancy advised on both transactions.

They said the structure is beneficial as it reduces the refinancing risk, with repayments spread out to year 15 and between years 35 and 40, and has opened up access to two markets for future funding at minimal cost.

The advisers added that the 15-year tranche helps reduce all-in cost of debt by around £36,600 per annum for the next 15-years – or a cumulative saving of around £550,000.

Murray Macdonald, Boston Mayflower’s chief executive, said: ‘We are thrilled to be able to announce this fantastic news, not only as it is the first of its kind for a housing association, but more importantly this will enable Boston Mayflower to provide much needed homes in the local community.’

Adrian Bell, head of debt markets at Canaccord Genuity, said: ‘We are delighted with the outcome of this transaction. It marks another innovation in the funding of HAs by allowing Boston Mayflower to replace restrictive bank debt in the most flexible manner possible, with a combination of revolving bank loans, private placements and a public issue.

‘It marks the lowest cost funding ever achieved for a HA of under 15,000 units.’

Asset Cover is 1.05% EUV-SH or 115% MV-ST or 1.00 x cash, along with portfolio specific income cover at 1.00x. Security includes general needs stock along with sheltered and supported housing, shared ownership and intermediate rent units.

Boston Mayflower achieved a AA-/Stable rating from Standard & Poor’s in June 2014.