Together returns to bond market with 3.365% deal

Together Housing Group has returned to the bond market more than two years after its debut issue to sell £50m of retained bonds at a spread of 120 basis points and all-in cost of 3.365 per cent.

The 28-year bond priced over the 4.5% December 2042 gilt, where the yield was down at 2.165 per cent.

Together’s original bond of £250m with £50m retained, achieved a 4.567 per cent all-in cost and spread of 145 bps over the gilt in December 2012. The coupon was 4.5 per cent.

Since then, the group has raised funding through the Affordable Homes Guarantees Programme (AHGP).

It has also signed off a private finance initiative (PFI) scheme to refurbish 1,270 homes on the Pendleton Estate in Salford in September 2013. That project used a special purpose vehicle (SPV) to secure £82.6m of funding through the first unwrapped two-tranche listed bond structure for a new PFI project.

Mark Dunford, executive group director of resources at Together, said the retained bond sale was an ‘excellent result for the group and ensures we can continue to meet the housing needs of the communities we work in.’

He said: ‘With the current market conditions in terms of both gilt and margins it prompted us to issue now to ensure we locked into the best rate possible for the long-term benefit of the group, even if it meant some short-term cost of carry.

‘As part of our long-term funding strategy the funds will be used to pay down a number of revolving credit facilities across the group which in turn will then be re-used to fund our development programme’.

The 38,000-home provider now has an A2 stable rating from Moody’s. That is a notch below the Aa3 it had in 2012, before the ratings agency downgraded 29 of its HA credits in response to the near-insolvency of Cosmopolitan Housing Group and concerns over the regulatory framework.

Click here for Together’s latest financials

The latest deal completed on Wednesday this week (11 February 2015) after having priced on 4 February 2015. Santander acted as bookrunner.

It follows a debut own-named bond by RHP, which issued £175m over 30 years at an all-in cost of 3.3 per cent.

Other HA bond deals in January 2015 saw Scotland’s Wheatley Group sold £50m of retained bonds at an all-in cost of 3.542 per cent and a spread of 140 bps, while Paragon Community HG had raised £250m on the bond market at an all-in cost of 3.626 per cent, and a spread of 140 basis points.

The Together group consists of six partners from across Lancashire and Yorkshire. It reported a 25 per cent operating margin in 2013/14 financial year, with £603m of debt and over £1bn of assets.

It reported interest cover ratio of 7.44x and debt per unit of £14,600.

The funds have been issued via treasury vehicle, Together Housing Finance, to be on-lent to the group’s subsidiaries, including Chevin Housing Association, Green Vale Homes, Housing Pendle, Pennine Housing 2000 and Twin Valley Homes.

Along with Great Places Housing Group, Together was one of the first regional HAs in the north of England to go down the own name bond route.

About £65m of that original funding was to partly refinance subsidiaries and release them from business plan covenants agreed with the banks at the time of stock transfer. Funding was also used to help fund the development programme.

Security on the bond was set at the standard level of 105% EUV-SH and 115% MV-ST.

The PFI bond was listed on the Irish exchange, which is seen as having a quicker turnaround and tax benefits. Together HG set up SPV Pendleton Together Operating Ltd, owned by its subsidiaries Pennine Housing and Chevin Housing Association.