Together taps bond market for £100m at 150bps over gilts and strengthens liquidity

News01 May 2020Luke Cross

Together Housing Group has become the latest major association to re-enter the bond markets, resulting in a tap at a spread of 150 basis points (bps) and an all-in cost of 2.1 per cent.

Together taps the bond market (picture: Getty)

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Together Housing Group becomes the latest major association to re-enter the bond markets, securing funding at an all-in cost of 2.1 per cent #ukhousing #socialhousingfinance

The 37,000-home association – which operates across Yorkshire and Lancashire – becomes the fourth large provider to take advantage of the low gilt yield environment amid a return of activity in the sterling markets.

On Wednesday (29 April 2020), it tapped its existing £250m, 4.5 per cent 2042 bonds, which it issued in 2012, becoming one of the first regional North-based provider to enter the bond markets at the time.

Its latest deal follows The Guinness Partnership earlier in the month, which sold £250m of 35-year bonds as part of a £400m issue at a spread of 145bps over gilts and all-in cost of 2.02 per cent.

Sanctuary Group issued £350m of 30-year bonds in April 2020, at 170bps and an all-in cost of 2.375 per cent.

Optivo was one of the first issuers to enter the corporate bond markets at the end of March, after a period of severe turbulence triggered by the coronavirus pandemic, closing a 15-year, £250m issue – with £100m retained – at 230bps and a coupon of 2.857 per cent.

The reference gilt was at 0.6 per cent at the point of Together’s pricing, with the transaction led by sole bookrunner Barclays.

The money will be used to provide extra liquidity to deliver new properties, along with investing in existing stock and to fund various energy projects.

The bonds were secured at standard asset cover levels.

Mark Dunford, executive group director of corporate services, said: “There was a strong interest by investors and pricing was set at 150 basis points over gilts giving an overall yield of 2.113 per cent.”

Together is rated A3 stable by Moody’s. The ratings agency said in November that this is a reflection of the association’s “continued focus on low-risk social housing lettings, low debt-to-revenue metrics, improved governance and strong liquidity”.

Together’s original bond of £250m with £50m retained achieved a 4.567 per cent all-in cost and a spread of 145bps over the gilt in December 2012. It sold the retained bonds in 2015.

On the latest deal, Devonshires provided Together with legal advice, while Addleshaw Goddard worked on the funder side. Savills provided valuations.

The money was raised via treasury vehicle Together Housing Finance, with the end borrower being Together HA.