MORhomes re-enters markets to raise £35m for two HAs at 3.01%

News15 Apr 2020Luke Cross

Funding aggregator MORhomes has become the latest social housing organisation to re-enter the capital markets, raising £35m for two associations at an all-in cost of 3.01 per cent.

MORhomes is the third social housing organisation to announce its return to the capital markets

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Housing funding company re-enters markets to raise £35m for two housing associations at 3.01% #ukhousing #socialhousingfinance

The majority of the money was raised via a tap of its existing 3.4% bond, understood to have completed last week at a spread of around 230 basis points and pricing over the 2038 reference gilt.

The funding – which priced on Monday 6 April – includes £25m that will be lent to Thrive Homes, a 4,700-home association based in Hertfordshire, and another £10m for Melin Homes, a 4,000-home social landlord based in south-east Wales.

MORhomes is the third social housing organisation to announce its return to the markets following a period of severe volatility brought about by the COVID-19 pandemic.

Optivo helped re-open the sterling corporate bond market at the end of March, with a 15-year own-name bond, followed swiftly by Sanctuary Group’s 30-year public issue.

Melin is an existing borrower and Thrive becomes MORhomes’ 12th housing association borrower, with the deal taking MORhomes’ total loan book to £347.5m.

Barclays acted as sole bookrunners on the deal.

Patrick Symington, chief executive at MORhomes, said: “The ability to execute this deal in very volatile conditions underlines the strength of MORhomes’ approach to the market."

MORhomes is a plc owned and controlled by housing associations.

Its first issue of £250m was completed in February 2019 at 190bps and a coupon of 3.4 per cent.

In October last year, MORhomes shaved 15bps off the spread on its debut bond, raising £38.6m at 175bps and delivering an all-in cost of 2.788 per cent.

The bond accounts for just over 95.35 per cent of the funds on-lent to the housing associations. The MORhomes financial structure also sees 3.5 per cent of the funds on-lent as second secured debt from an investor, while 1.15 per cent is contingent convertible debt, provided by the association and lent back to them.

Mr Symington said the group’s unique “standby liquidity agreement” enables borrowers to hold all the documentation for the funding deal ready and waiting for the right opportunity.

“In this case we executed the deal within the day.”

Anne Costain, executive director of resources at Thrive, said: “I feel that in the current climate the price negotiated by MORhomes is value for money for Thrive.”

Peter Crockett, deputy chief executive at Melin, said it was the second drawdown for the association and shows the benefit of having the standby liquidity agreement in place.

He added: “We achieved a very competitive all-in strike price that will now give a greater degree of certainty of costs over the coming months.”