Housing association looks at rolling finance after first private placement

Published by 24publishing for 24dash.com in Housing and also in Central Government, Communities, Local Government

A housing association which successfully secured £61m through its first private placement this month says it will look at tapping into the market again – possibly every two to three years.

Bromford is only the sixth housing association to raise cash through a private placement, securing 25-year bonds for an overall fixed interest rate of 4.93 per cent.

Interestingly, the placement attracted two high profile UK investors broadly new to the social housing market – insurance giant Legal and General and M&G Investments, part of Prudential.

Private placements and public bonds have increasingly been used by housing associations to plug the gap left by banks who are re-pricing debt and withdrawing from long-term loans because of regulatory pressures.

In the first three months of the year bond finance overtook bank lending as housing associations' primary source of finance, according to the Homes and Communities Agency (HCA).

Andrew Battrum, group finance director at 27,000-home Bromford, said: “The private placement market is a way of sourcing smaller amounts of money than a public bond or going to the bank. We want to tap into this market again in the future and it’s a potentially – with insurance and pensions funds etc – a long term source of finance.

“They have got long-term commitments they need to make like insurance policies and we have a good, stable long-term cash flow in principal linked to RPI.”

He said Bromford would look to tap into the market every two to three years depending on its development programme and said he expected more housing associations to look at private placements.

“We have got a relatively small Homes and Communities Agency programme so it’s really putting finance in place for our own programme. It means we have control over it.”