- Karbon Homes is one of the largest housing associations in the North of England, owning and managing nearly 30,000 homes.
- Karbon plans to build more homes in the North-East, for which it requires up to £250m in long term funding.
- Karbon had a number of relatively high cost bank facilities in place, for which it was seeking cheaper, long term funding.
- JCRA worked with Karbon for 12 months to develop a suitable financing solution, including a shorter term bank facility.
- For long term funding a public bond or private placement were deemed the best solutions, though given market volatility choosing a particular market was difficult.
- On this basis, JCRA advised on the selection of joint lead managers, who were able to execute in either market to provide flexible decision making.
- JCRA analysed the current market, potential pricing and flexibility of each option, advising Karbon a public bond issue would achieve the best outcomes.
- A rating was required to issue a public bond, JCRA assisted Karbon in achieving an A+ rating, currently the highest credit rating in the North-East.
- Karbon was able to achieve longer-term funding than it would have from banks, with a 29 year all-in rate of 3.50% for £150m raised, with £100m retained for future sale, without any corporate covenants.
- Karbon was able to repay some of its more expensive bank facilities, reducing long term interest costs, allowing Karbon to build more homes.
- Strong debut issue, reflecting substantial investor appetite for Karbon and the North-East.
- This initial issue provides a good foundation for future capital markets investment.