25 January 2012
Historic bond funding deal will enable West Kent to build 368 new homes across Kent during 2012-15.
On Wednesday 18 January West Kent, along with nine other registered providers entered the bond market through an issue of a bond from The Housing Finance Company (THFC).
This is the first time West Kent has obtained borrowing in this way at a time when bank pricing is once again increasing for housing associations. The bond which has a yield of 4.94% breaks a barrier for long term deals for investors and borrowers alike.
Piers Williamson, Chief Executive of THFC said: “Since 2006 out of £3.6bn of HA public bond issuance, only £180m has priced below 5% - and we had been responsible for £69m of that”
West Kent is initially borrowing £25m with a view to increasing this by a further £10m in the next 18 months. This will mean West Kent can commit to and build 368 new homes as part of our agreement with the Homes and Communities Agency.
Craig Reynolds – Finance Director at West Kent said: “The rate at 4.94% is a great result and far below our appraisal assumptions. The offer from THFC fits with our requirements. There is symmetry between private institutional investors being cash rich with uncertainty around future cash flows, and housing associations being cash poor but with a predictable rental stream in the future. The reduction in grant from HCA and the move to revenue subsidy in the form of affordable rents means we need to borrow more to build the same number of units.”
Piers continued “Sterling investors are no fools; they know that housing associations are increasingly looking to the capital markets as banks are no longer prepared to do long term deals. This reflects the new reality for associations. They can still do funding deals that most banks and many sovereign nations can only dream of”.