Platform launches £350m debut bond, with a coupon of just 1.625%

News31 Jul 2020Sarah Williams

Platform Housing Group has completed its inaugural public bond, achieving a coupon of just 1.625 per cent on the £350m, 35-year issuance.

Platform Housing Group has completed its inaugural public bond (picture: Getty)

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Midlands housing association completes inaugural public bond issue, as it sets out to meet 2,000-homes a year target #UKhousing #SocialHousingFinance

The bonds were nearly four times oversubscribed, the group said, following demand “well in excess of £1bn from 60 investors”.

The Midlands-based group, which manages more than 45,000 homes, set out its intention to pursue an own-named issuance in an interview with Social Housing in December as it completed the full amalgamation of its group a year on from merger. This included the potential for Platform to launch its own Euro Medium-Term Note (EMTN) programme, which would make it one of just five housing associations to have one.

The provider had previously accessed the capital markets through aggregator Blend, and is a shareholder in MORhomes.

It gained its first credit rating in March, with a long-term issuer rating of A+ (stable) from Standard & Poor’s, placing it among the highest-rated providers in the sector.

Earlier that month, as the capital markets reacted to the unfurling COVID-19 situation, the group’s chief executive Elizabeth Froude said the group was keeping a “watching brief” on the markets in case of any incentives to go out earlier than originally planned.

Wednesday’s trade saw the social landlord issue £350m of bonds maturing in August 2055, of which £50m is retained, with an all-in price of 97.657 per cent.

At 1.625 per cent, the coupon is understood to be the lowest ever achieved in the long-dated sterling bond market for this credit rating category (across all sectors).

Rosemary Farrar, chief finance officer at Platform, told Social Housing that the result was achieved after the group worked hard to help investors understand Platform’s story as a strong organisation, with a strong balance sheet and “very strong credits”.

“We did a very in-depth presentation, because we wanted to get across those key metrics, which show that if you look at it on paper Platform is best in class. So we wanted investors to see that and weigh that against any sort of new issue premium, and they obviously understood it, which was great.”

This included Platform’s focus on social and affordable rents as opposed to pursing a cross-subsidy model – making its credit profile stand out from many larger organisations in London and the South East, for example.

“We don’t do market sale unless it’s an integral part of a development that we are doing in partnership with a developer, it is just shared ownership and social rent, which makes us a strong credit – but it also makes us quite cash hungry,” Ms Farrar said.

Platform has topped the league table of English associations building the most social rent homes for two years running in Inside Housing’s Top 50 Biggest Builders Survey – delivering 458 last year and 523 this year – and is second only to Scotland’s Wheatley Group in the UK overall.

“Our business plan sets out that we’re going to spend at least £200m a year on investing in our existing homes or on new homes,” Ms Farrar said.

EMTN programme

In recognition of this appetite for cash, launching an EMTN programme “was and is Platform’s long-term aim”, Ms Farrar confirmed.

Currently just four other housing associations – A2Dominion, Clarion, Places for People and most recently LiveWest – have an EMTN programme of their own.

However, in view of the board’s awareness of potential market volatility later in the year as the economy reacts to government financial support programmes ending, the group opted to pursue a public bond in the immediate term ahead of setting up its EMTN programme.

Ms Farrar added: “While we’ve been getting ready for the bond, we’ve had half an eye to the EMTN programme, so some of the preparation has been for both.”

In establishing its debut bond, Platform appointed three “big hitters” – Barclays Bank, Lloyds Bank Corporate Markets and NatWest Markets – as joint bookrunners. Ms Farrar said they “knew how to sell us”.

On the day, investor interest included a “surprising amount of European money coming in”. Ms Farrar said: “There were all the big UK investors that you’d expect, but a lot of European money, and I think the feedback that we’ve had is that sterling is a safe place, they’re all wanting to invest in sterling. So I think from a timing point of view that was very fortunate, too.”

Having the proceeds of the bond in hand means that Platform can continue to build out its new homes programme with confidence.

“We’re a partner with Homes England so we’ve got grant, we know how much we want to build, we will be able to build it now and we know that there’s housing demand in the areas in which we operate, so it’s absolutely been an essential part of making sure that our business plan continues.”

The group has previously set out plans to deliver 2,000 homes annually by 2023. Achieving this target will now tip back into 2023/24 as a result of the three-month impact of COVID-19, but overall delivery numbers will not be impacted, Ms Farrar said.

Commenting on Platform’s debut bond issue, Elizabeth Froude, group chief executive, said: “This has been a phenomenal piece of work delivered during a difficult time nationally and a great credit to all involved. I would like to thank the large number of investors, many of whom took the time to really understand our business, the regional strength and our strong commitment to social and affordable tenures.

“Our residents now and in the future will benefit for a long time, from the direct contribution this will make to the homes they will live in.”

Funders’ legal advice was from Addleshaw Goddard and property valuation was from Savills. Platform received treasury advice from Centrus with legal advice from Devonshires.