We’ve secured a £100m funding boost in a ground-breaking deal

28 October 2013

We’ve secured a £100 million funding boost to support our growth plans and enable us to continue to invest in communities in Somerset and the West of England.

We completed a ground-breaking bond issue, which will save us £3.6 million compared to other housing association bonds. This has been described as a big leap forward, paving the way for other housing associations to follow.
The bond is the first of its kind in the social housing sector, as it’s been issued with an extended deferral of drawdown, meaning that we’ve only drawn £1million today. Another £49 million will be received in November 2017 and we’ve retained £50 million of the bonds to sell to investors in the future.

Another exciting innovation is that this is the first listed bond to be issued by a housing association without a requirement for a credit rating.

Duncan Brown, our Director of Resources, said: "Our entry into the capital markets has secured our future by providing long-term fixed rate funding to support our growth plans. We’re pleased to have accessed bond finance without the need to maintain a credit rating and by deferring the proceeds we’ve saved £3.6 million compared to a traditional bond structure. Securing this significant long-term funding will ensure we can continue to provide desperately-needed affordable homes across Somerset and the West of England.”

Cllr Elfan Ap Rees, Deputy Leader and Executive Member for Strategic Planning, Highways and Economic Development at North Somerset Council, said: “Knightstone is a major local employer whose investment in North Somerset and the West of England has provided an important boost for the local economy for many years. Today’s announcement is great news for jobs and growth in our region.”

The bond has 35 year maturity and is priced at a credit spread of 140 basis points above the yield on the benchmark gilt. TradeRisks acted as arranger and dealer of the issue, with Allen & Overy as the capital market lawyers. We were supported by Trowers & Hamlins as legal advisers.

Jon Slater, Joint Chief Executive of TradeRisks, said: "Knightstone’s transaction represents a huge leap forward in the flexibility that is available to housing associations and other corporates to produce significant cost savings. The deferred structure represents a win-win for all parties and demonstrates the flexibility that can be unlocked when issuers and investors collaborate directly without the constraints of a syndicated bond issuance process. Having overcome a number of practical, regulatory and other challenges we expect this to pave the way for other similar transactions."

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