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‘No shortage of investors’ for social housing, says Futures FD after £200m bond issue

Futures Housing Group’s £200m public bond issue at a coupon of 3.375 per cent shows that appetite for investing in social housing remains strong, according to its group finance director.

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Picture: Getty
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The Derbyshire-based registered provider, which owns and manages almost 10,000 homes across the East Midlands, issued the bonds earlier in February at a spread of 168 bps over gilts, maturing in February 2044.

After raising £150m immediately, the organisation will draw on the remaining £50m as it is required for housebuilding.

The bond is the latest funding phase following a refinancing, which included replacing a syndicated facility, and a group restructure in 2016.

Ian Skipp, finance and resources director at Futures, told Social Housing that the ability to generate competition in the public bond market was the prime reason the body opted for an own-name issuance.

“We looked at other options, including sticking with mainstream funding and mixing that with private placement,” he said.

“Ultimately the benefit of public over private debt was the competition,” added Mr Skipp. “Rather than us having one-on-one conversations, the investors were competing with each other to invest.

“In the week before issuing the bonds, we presented to numerous investors – the likes of Legal & General, Aviva and those types of funds. Pension trusts like long-dated housing association debt as it fits their model perfectly. They have a long-term commitment and they can guarantee a long-term income stream.”

Mr Skipp said the UK’s imminent withdrawal from the EU was not a key factor in securing the debt, but added that he was pleased to have the deal done ahead of any further political or economic turmoil.

“The ultimate driver is not Brexit; it is where we’re at as a business,” he said.

“Existing financing was starting to run out so it was right for the business to extend the debt to keep developing at the same pace.


“We did have an eye on Brexit. Conversations with the bookrunners for bonds heavily focused on the markets. But appetite remains strong for investment in housing associations.”

Asked about the demand from sterling investors for longer-dated bonds, Mr Skipp said that the pricing “compared very favourably to other housing bonds in the market and the level of interest we had suggests that there is no shortage of investors”.


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He said there was a strong order book, which was around six times oversubscribed.

“This enables us to tighten pricing and achieve a very strong result. The order book consisted of large and small investors and the eventual allocation included most of the large UK investors.

“We have got a broad spread of investors which was important to us for our future funding strategy.”


The funds are being used partly for development but also to refinance Futures’ original banking facilities of around £200m to new facilities of £110m.

Standard & Poor’s assigned the provider an A+ long-term issuer credit rating on 25 January, citing the “continuously strong demand for the group’s services in the low-risk social housing industry”. Reflecting the outlook on the UK, the rating had a negative outlook.

“The credit rating process is a good one to go through,” added Mr Skipp. “It helps inform people at different levels about stuff they don’t touch that often.”

He added that there is now a three-year window within which to sell the £50 retained bonds.

“If we drew it now we would be paying interest at 3.4 per cent and earning maybe 0.6 per cent in the bank so it would be costing us significantly just to hold the cash.

“We will wait until the development pipeline indicates that we need the other £50m.”

The group is looking to build 1,200 homes over the next four to five years, meaning they have moved up from 70 units per annum to around 250 in the past three years.

Santander and NatWest Capital Markets were bookrunners for the bond, while Savills Financial Consultants provided advice.

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