Optivo takes ‘wait and see’ approach on bond as coronavirus continues to rock financial markets

A number of corporate issuers seized on an opportunity to launch bonds when the bookrunners saw a window on Wednesday and Thursday last week, as central banks looked to be stepping in to try to mitigate market disruption.

New council bonds company the UK Municipal Bonds Agency priced its first deal, raising money for a single borrower and completed in the name and credit of Lancashire County Council.

Midlands-based housing association Longhurst Group issued £100m of retained bonds maturing in 2042 at an all-in cost of 2.339 per cent, and was closely followed by The Housing Finance Corporation on Thursday, which sold £25m of retained bonds at 140 basis points over gilts and an all-in yield of 2.26 per cent, on behalf of Berkshire-based Silva Homes.

Swan also sold £25m of 2048 retained bonds around the same time, at a yield of 2.74 per cent, but has declined to provide any further details of its deal.

The end of last week saw further coronavirus-driven volatility, resulting in 20-year and 30-year UK gilt yields moving to record-low levels on Friday, before an oil-price war instigated by Saudi Arabia triggered further chaos and caused Wall Street to halt trading for 15 minutes on Monday.

Coronavirus was then declared a global pandemic this week, sending stock markets into the steepest sell-off since 1987’s Black Monday crash, before central banks stepped in again, pledging to stabilise the global economy.

Dominic Brindley, head of public sector at NatWest Capital Markets – who helped execute Longhurst’s deal – told Social Housing that even amid the volatility “we still continue to see windows of opportunity for issuers to access the capital markets”.

He pointed to multinational food firm Danone successfully raising €800m earlier this week, adding that NatWest Markets has been active across all capital markets over the past fortnight.

He added: “The market remains open and a strategic approach, including a focus on all-in yields, is required to isolate key issuance windows to price successful transactions in a variable environment.”

Optivo’s deal would mark the first own-name public issuance for a housing association since January 2020, when Clarion Housing Group raised £350m with its first sustainable bond, achieving the lowest coupon for a primary bond issue by a housing association.

Clarion’s 15-year secured issue priced at 98 basis points over gilts and an all-in effective rate of 1.88 per cent on 15 January, with significant overseas interest as the association new pan-European ‘Certified Sustainable Housing Label’.

In October 2019, Sovereign issued a £375m own-name bond – with £125m retained for later sale – at a spread of 127 basis points over gilts, marking the tightest spread of the year for a public housing association deal.