Stonewater issues £250m of fully retained bonds
Stonewater has issued a £250m bond without drawing any money.
Its debut benchmark public issue, maturing in 2045, was done at a coupon of 3.375 per cent but was fully retained for future sale.
The bond was issued on 1 November through the 31,500-home group’s funding subsidiary, Stonewater Funding plc.
John Bruton, executive director of finance at Stonewater, said the bonds represent another source of funding for Stonewater “alongside a loan which we hope to conclude in due course with the European Investment Bank [EIB]”.
The funding will support the development programme, which is set to deliver 2,765 new affordable homes over the next four years.
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The housing provider set out on investor meetings in February this year with a view to a bond or private placement, and met with funders including Pricoa, at which point it decided to pursue a £100m shelf facility with the US investor.
Geoff Chamberlain, director of corporate finance at Stonewater, said they had got so far down the line with documentation for a public issue that, following consultation with the UK Listing Authority, they opted to go ahead with a fully retained structure.
That approach injected some extra competition into the Pricoa discussions. A fully retained bond also marks a first for the financial markets.
He said there is little additional cost to doing it this way, though there could be some duplication of fees when it comes to selling the bonds.
Mr Chamberlain added that the coupon takes advantage of the current low-rate environment. Security will not be charged on the bonds until they are sold.
When sold, Stonewater Funding plc will on-lend to specific registered providers in the group, including Stonewater Ltd, Stonewater (2) Ltd and Stonewater (5) Ltd.
Traderisks advised and acted as arranger on the bond. Devonshires and Berwin Leighton Paisner provided legal advice, while JLL performed the valuation.
Stonewater – which is rated A2 by Moody’s – currently plans to deliver 6,500 homes over 10 years.
Mr Chamberlain said the group will be looking to increase its development plan as a result of the confirmation of a return to CPI+1% on rents.
The association is still awaiting news on its application for a £100m loan from the EIB. Chancellor Philip Hammond said in the Autumn Budget that “we stand ready to step in to replace European Investment Fund lending if needed”.
At the 2017 financial year end, Stonewater had funding from 10 lenders and total loan facilities of £1bn, of which £223m was undrawn. The £100m Pricoa funding was agreed after the year end.
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