Bromford, one of the largest housing associations in the Midlands and South-west, secures deferred funding after closing a new £50m private placement with a sole UK investor.
It means the housing provider has surpassed the half a billion pound mark since completing its two mergers with Merlin and Severn Vale; raising £550m of new funding through the banking and capital markets in that period. The organisation has grown to one with 44,000 homes and the funding will be used to deliver its ambitious new homes programme of 13,000 homes by 2028.
The funding package was secured with an all-in coupon rate of 2.26% on a 14-year maturity to complement its shorter-term bank funding and existing longer-term bonds. In line with Bromford’s 2018 debut public bond and 2019 North American private placement, the deal is covenant light with no asset gearing. It was finalised on a deferred basis for 12 months allowing the registered provider to leverage historically low gilt rates and lock in the price amidst continuing political and economic uncertainty.
The deal compliments and further diversifies Bromford’s growing loanbook and comes off the back of its annual investor update in May which led to a significant level of reverse enquiries from investors.
Total new funding includes the housing association’s £300m debut public bond; £100m inaugural North American private placement; £100m revolving credit facility with Lloyds Bank; and the £50m private placement concluded today. On top of that, the organisation renegotiated £200m of legacy debt as to create new revolving credit facilities as part of its merger restructure.
Imran Mubeen (pictured above), Bromford’s Head of Treasury, said: “We have established strong levels of liquidity for the group and this is a position we are proactively seeking to maintain as we continue to invest significant funds into new homes. The 12 month deferral was the key aspect of this deal, enabling us to leverage prevailing low gilt rates and provide future certainty to the business whilst drawing the new funding to meet our cash flow requirements and managing our debt burden effectively.
“The high volume of investor enquiries following our annual investor update was again a testimony to our strong financial performance, the viability of our updated business plan and the attraction of our renewed strategic focus. It is particularly pleasing to retain the highest level of investor confidence and interest after our recent Moody’s regrade, as the key strengths of our business remain apparent. We will continue to pro-actively engage the investor community and look forward to strengthening existing relationships and forming new ones. Our mantra is simple: the greater our savings on funding costs, the more we can spend on delivering the Bromford proposition to more customers.”
Grant Vaughan, Partner at Newbridge Advisors who arranged the deal, added: “This transaction further demonstrates Bromford’s strong standing in the capital markets. The structure allows Bromford to de-risk its future financing needs whilst locking in historically low interest rates. This is a great example of how a nimble treasury strategy can create value and ultimately lead to increased development of social housing.”