JCRA, the independent financial risk advisor, today announces that it has advised Karbon Homes (‘Karbon’) on its inaugural £250m secured bond issuance aimed at funding its ambitious business strategy which includes the building of more homes and investment in its existing homes. Karbon is one of the largest housing associations in the North East and Yorkshire, owning and managing nearly 30,000 homes.
JCRA assisted Karbon in achieving a strong A+ credit rating from Standard & Poor’s.
Karbon issued £250m 3 3/8% Secured Bonds on 15th November, maturing in 2047. £150m bonds were sold into the market with a further £100m held as retained bonds for later sale. Lloyds Bank Corporate Markets and NatWest Markets acted as joint lead managers of the deal.
The offer of £150m bonds was met by very strong investor demand after a three-day roadshow. A wide range of investors expressed interest enabling the margin to be tightened from initial indications of Gilts +165-170 bps, to a margin of 153 bps and all-in cost for Karbon of 3.50%.
The deal achieved a tighter margin than recent housing association bond issues in the public market and published deals in the private placement market. It is an impressive result for a debut issuer in a volatile market, which reflects both the quality of the credit and investor appetite for geographic diversification.
Henrietta Podd, Director at JCRA, commented: “We’re delighted to have worked with Karbon in what was a highly successful deal in very difficult market conditions. Karbon is the first housing association in the North East to come to the capital markets for many years. It is an organisation that is having a positive and material impact on the North of England and we are proud to have contributed. This funding has provided significant value by reducing debt funding costs and improved surpluses enabling more homes to be developed and services to be delivered. Our team has worked on 27 UK housing association and charity private placements and bonds over the past two years.”
Mark Reid, Executive Director of Resources at Karbon Homes, said: “We have experienced significant growth this year by committing to playing our part in delivering the homes our region needs. We are stepping up our ambitious development programme from 340 to 500 homes per year. JCRA was the ideal partner to take us into the next stage of our growth plan and we now look forward to delivering the scale and quality of development we know our communities need.”
JCRA’s Social Housing team has 29 years’ experience offering independent treasury and funding advice to housing associations throughout the UK. The team provides debt restructuring and refinancing advice, debt capacity reviews, M&A evaluations, hedge and derivative management, as well as assisting with reporting on treasury governance and objectives.
Karbon provides social rented, affordable, specialised, shared ownership and market rented homes, and also develops shared ownership and market sale homes to meet customers’ aspirations. As a profit-for-a-purpose business, Karbon invests any surplus it generates into improving properties and communities, building new homes and delivering services which provide sustainable outcomes for customers and communities.