MORhomes returns to markets to tap bond at 175bps over gilts

News29 Oct 2019Luke Cross

A housing association-owned funding aggregator that launched earlier this year has returned to the capital markets for a bond tap.

MORhomes shaved 15 basis points (bps) off the spread on its debut bond in February 2019, raising £38.6m on 25 October at 175bps and delivering an all-in cost of 2.788 per cent.

Its debut 19-year, £250m bond priced at 190bps over gilts, with a coupon of 3.4 per cent, and was taken up by nine borrowers in England and Wales.

The latest deal – maturing in February 2038 – was arranged on behalf of London-based Wandle HA through a tap of MORHomes’ 3.4% Notes 2038 and issued through its Social Bond Programme.

It comes a few weeks after long-standing sector aggregator The Housing Finance Corporation (THFC) raised £33.5m for three housing associations at sub-2.5 per cent.

A number of housing associations have also taken advantage of low gilt yields between July and October, issuing secured public bonds at between 130bps and 148bps, at maturities between 24 and 30 years.

Wandle becomes the tenth HA to take a loan through MORhomes.

The agency has a £5bn Euro Medium-Term Note senior secured debt programme to access the markets.

Patrick Symington, CEO of MORhomes, said: “Documenting and agreeing this transaction has taken less than four weeks from start to finish, demonstrating that MORhomes is a fast and highly efficient way for housing associations to access the capital markets.”

Sue Bate, executive director of finance at Wandle, said: “As one of the initial investors in MORhomes, we are delighted to be the first ‘tap’ borrower and secure funding at rates that will help deliver our long-term financial plan.

“Ultimately, this will enable us to build more homes and improve the services we can provide to our residents.”

MORhomes said that it aims to expand the investor base beyond the UK and is specifically targeting socially responsible investors.

In July, MORhomes told Social Housing it is reducing the term of the unsecured period on future deals from 24 to 12 months, while introducing an alternative way for borrowers to charge assets.

Mr Symington confirmed that the Wandle deal includes the change to security.

MORhomes also said it would be looking at individual deals for housing associations and aggregated bonds, either through taps or by opening up new maturities.

Borrowers need to become shareholders in the company and can take loans of £10m upwards.

S&P has rated the agency and its programme A- with a positive outlook.

NatWest Markets managed the tap.

*Hear from MORhomes, THFC and others at the Social Housing Annual Conference on 4 December 2019, where there will be a particular focus on impact investing and ESG. Click here for details.