Newlon Housing Trust has raised £100m of senior secured debt through a private placement with US and UK institutions.
The 15 and 20-year notes have an average interest rate of 4.31% – the second lowest coupon achieved by a housing association in the capital markets this year.
Newlon, which owns 7,300 properties mainly in north and east London, will use the money to support its development programme.
Housing associations are increasingly tapping the capital markets for funding to cover a shortfall in housing grants. The deal also reflects insurers’ and pension funds’ growing appetite for providing debt to relatively low-risk property sectors.
Newlon, whose existing £435m of facilities are almost all bank debt, obtained a Aa3 credit rating from Moody’s Investors Services before a transatlantic roadshow and the placing was three times oversubscribed.
Rita Akushie, deputy chief executive and finance director of Newlon, said the notes were sold to a US and two UK investors, one of which was new to the private placement market. She said the placing offered more flexibility than a bond issue.
Akushie added: “It didn’t make sense to try raising £200m or £250m. We had to go for an amount that suits our planned rate of growth. For bond issues, certainly for our sector, if you’re raising below £200m it’s not a very large bond.”
Barclays Capital and Deutsche Bank Securities arranged the placing for Newlon, whose financial adviser was Canaccord Genuity.