Sovereign issues bond at tightest spread of the year for a public HA deal

Graeme Gilbert, treasury director at Sovereign, said that the group’s five-year plan agreed in June set out ambitions to deliver “more homes, better places”, and incorporated a move away from Section 106 agreements – which had made up 90 per cent of its delivery programme – to more land-led development.

Sovereign is heading for 1,900 homes per year, of which 90 per cent will be of an affordable tenure.

Ms Barnes told Social Housing that the long-dated debt “feels consistent” with the shift towards the land-led strategy and the tenure types the association focuses on, including affordable and social rent and shared ownership.

Mr Gilbert added that during its roadshows, Sovereign’s commitment to social purpose was a significant focus. He said that some correlations were made by investors to the environmental, social and governance agenda.

A number of established investors took larger tickets, and some new investors took smaller tranches.

Investors were also particularly interested in health and safety, which is “number one in the risk register” for Sovereign, despite it not owning many tower blocks.

Part of Sovereign’s focus is also on improving existing homes, with a longer-term view on standards and re-lets, areas such as EPC ratings of the buildings, and the quality of the environment in which the homes are delivered.

Asked about the decision to keep £125m retained, Mr Gilbert said that the group took the benchmark amount because it fit requirements, including to pay down existing revolving credit facilities. There was no restructuring of loans.

Ahead of the bond, Moody’s and Standard & Poor’s reaffirmed Sovereign’s ratings at A2 and A+ respectively.

NatWest and Lloyds were bookrunners and joint lead arrangers on the deal. National Australia Bank and Sumitomo Mitsui Banking Corporation – which were new to Sovereign as part of the club loan – were also on the panel.

Kirsty Garrett, associate director in the debt capital markets team at Lloyds Bank, said the strong performance of the management team during the roadshow helped generate a high-quality order book.

She added: “The transaction ultimately priced tight to sector comparables and Sovereign’s existing bonds and sets a positive precedent for future issuance.”

Dominic Brindley, head of public sector at NatWest Markets, added that the size and depth of the order book and the overall outcome are a great reflection of Sovereign’s sector-leading credentials, which bodes well for future issuances.

JCRA was Sovereign’s funding advisor on the bond.

Legal advice was provided by Trowers & Hamlins and Pinsent Masons. JLL performed the funder’s valuations. Winckworth Sherwood and Wright Hassall worked on security charging.