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£150m Private Placement and A+ credit rating for Octavia Housing
Case studies

£150m Private Placement and A+ credit rating for Octavia Housing

Background
  • Octavia Housing is one of the oldest social housing providers in the UK, founded over 150 years ago, owning over £2bn of property in Central and West London
  • Octavia planned to build more homes in Central and West London for which it required funding
  • Existing bank facilities restricted further funding needed for development, requiring renegotiation
  • Octavia faced either a full-scale refinancing resulting in termination costs, or a staged approach restructuring certain facilities, while repaying others
  • Octavia was seeking cheap, long-term funding to replace restructured and maturing debt, as well as for new development over the medium term, so did not require to draw the full amount initially
Our Approach
  • JCRA acted as Octavia’s treasury adviser for three years, providing regular treasury advice and supporting various strategic initiatives
  • JCRA initially compared the options of full refinancing (possibly funded by a public bond issue); and a more staged, negotiated approach
  • Octavia embarked on a staged refinancing including initially raising a new RCF, renegotiating two long-term loans, repaying two existing lenders, and culminating in a private placement
  • JCRA supported Octavia and its board throughout this process and assisted Octavia in obtaining an A+ (stable) rating from S&P, a great achievement at a time when a number of larger HA’s were downgraded
  • JCRA advised on the selection of the private placement agent (Santander), as well as encouraging the inclusion of US investors to create competition in terms of pricing and terms
Benefits
  • Octavia was able to secure £150m from PP investors in the UK and US, enabling repayment of certain bank facilities, as well providing capital for development for the next five years
  • Multiple deferred drawdowns stretching over three years enabled Octavia to reduce negative cost of carry, matching drawings for development as and when required
  • The credit rating, along with the inclusion of US investors, resulted in an extremely competitive bidding process (3x oversubscribed), with an average margin of 161 bps (3.5% all-in), with no public market or new issuer premium
  • The maturity profile ranged from 25 to 40 years, mitigating the impact of refinancing risk
  • Innovative structure including US and UK investors, enabling diversified funding sources from two markets, through one issuance
 

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