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Large housing association borrows £175m from North American investors
Large housing association Network Homes has borrowed £175m in a private placement with six investors from the United States and Canada.
The debt is made up of £150m of secured borrowing and £25m of unsecured borrowing, with the length of maturities ranging from 12 to 35 years.
For the £19m of short-term debt, which Network will have to pay back in 12 years, it will pay 2.94% in interest.
Its longest-term debts, of £47m over 30 years and £38m over 35 years, will require 3.65% of interest. For the unsecured 15-year £25m loan, the coupon was 3.52%.
Network said it deliberately varied the maturity lengths in order to diversify its loan portfolio, reducing future refinancing risk so it doesn’t have to pay all the loans back at the same time.
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While housing associations often seek to do this, it is unusual to see such a varied range of maturity lengths within one transaction.
The Japanese bank Mitsubishi UFJ Financial Group (MUFG), which arranged the placement, said it has managed similar deals in other sectors.
According to Network, the money will go towards its development programme, under which it is committed to starting at least 1,752 homes in London by 2021. This is part of its strategic partnership with mayor Sadiq Khan.
It is also building new homes in Hertfordshire using grant from the government’s housing delivery agency, Homes England. Network’s total pipeline is 3,000 homes.
Barry Nethercott, executive director of finance and governance at Network Homes, said: “The North American markets have been showing keen pricing and excellent flexibility of approach of late and we wanted to take advantage of those conditions to deliver on a number of corporate objectives.
“In particular, we wanted to smooth out our debt repayment profile by creating a good range of maturities, focusing on time points where we had little else to repay, and it seemed sensible to also consider a small level of unsecured funding, where we could be more flexible about the assets we set against it.”
Mark Wells, head of structured debt capital markets for MUFG in Europe, the Middle East and Africa, said: “Following the establishment of a lending relationship in 2017, MUFG is delighted to have been able to assist Network Homes with the placement of its inaugural private placement transaction.
“The North American [private placement] market is an alternative liquidity source which we believe will be important to UK housing associations as diversity of funding becomes increasingly relevant to the sector as a whole.”
