A2Dominion raises £150m in 24 hours with second retail bond

The 4.5 per cent unsecured sterling bonds, due in 2026, are guaranteed by A2Dominion Housing Group.

The transaction marks the second retail-eligible bond for the London and south-east housing provider in the space of 12 months, following a deal in October 2013 at 4.75%.

The proceeds of the issue will be lent to members of the A2Dominion Group, which comprises A2Dominion and its subsidiaries.  

The group said the transaction ‘closed after one day due to high demand’, and that the cash would be used to invest in the development programme and ‘further grow its diverse portfolio, which includes social housing, private sale and rent, shared ownership and student accommodation’.

Dean Tufts, A2Dominion’s executive director (finance and strategy), said: ‘This second retail bond issue is a continuation of our strategy to maximise long-term funding opportunities and diversify our sources of funding that can be utilised anywhere within the A2Dominion Group.

‘The bond issue will support the provision of high-quality housing services and allow us to further invest in both affordable homes and housing to be let or sold on the open market.’

When the order book opened, the group said the bonds would bear interest at a fixed rate of 4.5 per cent per annum, payable semi-annually in arrear in two equal instalments from the date of issue until they mature on 30 September 2026. The bonds had minimum initial subscription amount of £2,000 and are available in multiples of £100 thereafter.

Canaccord Genuity and Lloyds Bank acted as joint lead managers on the transaction.

Adrian Bell, head of debt markets UK at Canaccord Genuity, said: ‘This is A2Dominion’s second unsecured issue in the bond market.

‘Carried out on tighter pricing, with a longer maturity, the strong demand it has received from both retail and institutional investors attests to the quality of the credit and widespread appetite for unsecured housing association debt.’

Raj Jayaprakash, associate director at Lloyds Bank, said: ‘The success of A2Dominion’s second retail eligible bond highlights the strength of demand from both retail and institutional investors, with a good mix between existing investors and those that were new to the sector.

‘This transaction also breaks new ground in terms of maturity of 12 years, the longest ever in the retail bond market.’

A2Dominion has been rated AA- (outlook negative) by Fitch Ratings. Fitch has also assigned the bonds an expected long-term local currency rating of AA- (outlook negative).

The plan for the first retail bond issuance in 2013 was to drip-feed funds into Dominion Developments, which delivers the majority of market rent build, as the group looks to increase market rent levels from 1 per cent of its 34,000 properties in management to around 3 or 4 per cent in the next four to five years.

The London and south-east group said at the time that it faces a renegotiation on the pricing of its long-term legacy bank debt if it wants to collapse its structure following the merger of A2 HG and Dominion HG in 2008.