Bond markets pay dividends as Bromford raises £300m

Bromford, one of the largest housing associations in the Midlands and South West, has issued a £300m bond as it forges ahead with plans to build more than 1,000 homes each year.

Bromford finalised the £300m of fixed rate funding with a 30-year maturity today (THURS) and the price secured was 1.35 per cent higher than equivalent government borrowing (gilts). It represents one of the most competitively priced bond issues seen in the housing sector in recent years. The 29,000-home housing provider drew down the finance, which represents its first ever public bond, after a series of successful investor roadshows in London and Edinburgh that were held earlier this week.

The cash will allow Bromford to ramp up its housebuilding programme ahead of the formal completion of a partnership with Merlin Housing Society in July. The new organisation, which is also in talks with Severn Vale Housing Society over a merger, is looking to invest £1.5bn in 14,000 new homes in the Midlands and South West over the next decade.

Credit rating agency Moody’s last week confirmed that the Wolverhampton-based social enterprise had retained its sector-leading A1 credit rating in spite of changing its outlook to negative from stable. It pointed to Bromford outperforming previous business plan forecasts including “strong practices and procedures” and a “healthy liquidity policy”. In a further acknowledgment of Bromford’s financial strength, S&P Global also assigned the business an A+ credit rating.

Flexibility

Executive director of finance, Lee Gibson, said: “To secure this level of funding fixed over a 30-year period especially taking into account Britain’s prolonged economic uncertainty comes as excellent news and is testament to the strong financial focus we have maintained over a significant period.

“The additional money will ensure we can continue to have the flexibility to develop more new homes that help our customers build and rebuild their lives and we can do this outside the restrictions that grant funding and s106 developments can often bring – meaning we can continue building homes where people want to live, creating sustainable and thriving communities.

“Also, because the interest rates are so low and fixed until 2048, it means that we’re spending a minimum amount on interest repayments, freeing up our money to spend on the stuff that really matters to customers.”

Henrietta Podd, director at JCRA Group, said: “JCRA is delighted to have supported Bromford with its successful debut bond issue, which provides it with a great platform for its growing business. Its market-leading credit, demonstrated by its A1/A+ rating and focussed regional presence, has made this deal stand out from the crowd in terms of volume and spread.”