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Clarion raises £350m via bond at sector record rate
The country’s largest housing association has raised £350m as part of a bond issue at a record-breaking level for the sector.
The 125,000-home association secured the 15-year bond at an all-in rate of 1.88%, with Clarion describing it as the “lowest rate for a primary bond issuance by a housing association”. Both Livewest and L&Q hold the second lowest coupon rates after securing a rate of 2.25% on bonds they previously issued.
Clarion borrowed the money at a spread of 98 basis points over gilts. This is the joint lowest spread achieved by a housing association for a new issue, with Notting Hill also securing a spread of 98 bps for a £250m bond issued in 2014.
According to the group, the bond was heavily oversubscribed and attracted £1.3bn from well over 100 orders, including significant demand from European investors.
Clarion said the demand for the bond was strengthened by its commitment to environmental, social and governance (ESG) issues, which was underlined by the group becoming the first UK association to be accredited with the pan-European Certified Sustainable Housing Label in November.
In September, Clarion tapped one of its existing bonds to raise an extra £100m from a £250m bond it originally issued in April 2018. This was borrowed at an all-in rate of 2.708%.
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The bond comes after Clarion published its half-year accounts in December, which revealed the association had seen its surplus drop by more than 20% on the previous year as the result of increased investment in building new homes.
The association’s accounts for the half-year period to 30 September, saw its surplus hit £69m, compared with £87m for the same period last year.
Gareth Francis, director of treasury and corporate finance, commented: “Once again, our issuing framework allowed us to act quickly and take advantage of a good market opportunity. However, our ESG credentials also had a very significant part to play, particularly in garnering such wide interest.
“This reinforces our belief that a positive sustainability story would attract new funding sources. We hope that this issue builds momentum for the sector, increasing cost-effective investment in HAs – and pushing the sustainability agenda further forward.”
Update: at 11.20am, 30/01/2020 This article has been amended. It has now been confirmed that this is a sector record rate and comparisons have been added to the piece.
