Kingdom Housing Association has secured a significant funding package under a debut private placement which secures its development programme of over 1,100 homes until the end of 2019-20.
The funding package amounted to £85m of borrowing which is being provided by institutional investors jointly for a period of 30 years with repayment in 2048 and 2049.
The borrowing, which is secured against Kingdom’s housing assets, is to be used for Kingdom’s development programme and to repay £10m of Kingdom’s existing short-term debt placing it on a competitive long term rate. The development programme will be supported by the funding from the private placement enabling the development of 1,165 affordable homes which have been committed to with grant funding from Kingdom’s local authority partners, primarily Fife Council, and the Scottish Government.
Nick Pollard, Director of Corporate Support Services, who is responsible for finances at Kingdom, said: “This is a significant milestone in the history of Kingdom. The investor appetite we have seen for the proposals that Kingdom took to market is a massive vote of confidence in Kingdom’s financial strength, its future financial and growth plans, the governance and management of the organisation and its staff. The most important point, however, is the confidence institutional investors have in the plans for delivery of new affordable homes across Fife and its surrounding areas and thereby the support given to tenants in need of housing but also those people supported by the wider activities of the Kingdom group of companies.”
Kingdom’s funding package is being provided on the basis of an immediate drawdown of £35m and a further drawdown of £50m 12 months after the initial drawdown. There was significant interest from several investors, resulting in a heavily oversubscribed bid book and all the offers were all at competitive rates and terms. Margins were exceptionally competitive coming in at a level which was comparable to recently issued public bonds and existing trading levels of sector comparables in both the public bond and private placement market.
Nick added: “This funding package has been a long time in development and we couldn’t have completed the transaction without our advisors and partners in this process but also the staff within Kingdom who supported me and Tracey Jordan, Assistant Manager Treasury and Capital. We are delighted to be in partnership with not one but two strong long-term partners and very much look forward to developing a long term working relationship with them after the planned transaction completion. Kingdom aims to return to the capital markets in due course to seek further borrowing to deliver the remainder of its five-year rolling plan of development and we look forward to engaging with investors again at that time.”
Bill Banks, Chief Executive of Kingdom Housing Association (pictured above), said: “The funding we have obtained through this deal is at rates which enable Kingdom to meet its strategic objectives of delivering new affordable homes. Due to the rates that we obtained being better than our planning assumptions this provides further value to Kingdom. Taking account of the Local Authority and Scottish Government grant supporting these new homes, this leverages almost £165m into the Scottish and Fife economy, not just in construction but in many other areas which is very pleasing indeed.”
Kingdom was supported in the transaction by the team at NatWest Markets as lead arranger. Legal advice as Issuer Counsel was provided by the Harper Macleod team and Treasury Management support was provided by QMPF LLP’s team in Edinburgh.
