Housing association completes £100m deferred bond
Published by Max Salsbury for 24dash.com in Housing and also in Finance
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Knightstone Housing Association has completed a "unique and innovative" £100 million bond issue.
The deal is considered innovative because the bond has been issued with an extended deferral of drawdown, meaning that Knightstone’s has only drawn £1m today.
Another £49m will be received in November 2017 and the social landlord has retained £50m of the bonds to sell to investors in the future. Knightstone says the structure has saved it significant costs that other bond issuers have incurred by receiving all of the proceeds and carrying a large surplus cash balance.
In another first, it is the first listed bond to be issued by a housing association without a requirement for a credit rating.
Duncan Brown, the 12,000-home provider's director of resources, said: "Our entry into the capital markets has secured our future by providing long-term fixed rate funding to support our growth plans. We’re pleased to have accessed bond finance without the need to maintain a credit rating and by deferring the proceeds we’ve saved £3.6m compared to a traditional bond structure.”
TradeRisks acted as arranger and dealer of the issue, with Allen & Overy as the capital market lawyers. Knightstone was supported by Trowers & Hamlins as legal advisers.
Jon Slater, joint chief executive of TradeRisks, said: "Knightstone’s transaction represents a huge leap forward in the flexibility that is available to housing associations and other corporates to produce significant cost savings. The deferred structure represents a win-win for all parties and demonstrates the flexibility that can be unlocked when issuers and investors collaborate directly without the constraints of a syndicated bond issuance process.
"Having overcome a number of practical, regulatory and other challenges we expect this to pave the way for other similar transactions."
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