MUFG has arranged a £175 million private placement with six United States and Canadian investors for UK social housing organisation, Network Homes.
The debt comprises £150m of secured borrowing, plus £25m of unsecured borrowing. Maturity terms range from 12 years to 35 years, with most of the money due for repayment between 20-35 years.
The pricing ranged from 2.94% for £19m of 12 year debt to 3.65% for £47m of 30 year and £38m of 35 year debt. The maturities were deliberately framed to smooth Network's debt maturity profile and reduce any future refinancing risks.
MUFG arranged the placement through its UK and US entities. While the range of maturities and secured/unsecured debt within one transaction is currently unusual within the housing association sector, MUFG has managed similar deals within other industry sectors and has a strong track record of managing bond placements in the North American market. MUFG also has a strong understanding of the housing association market well through their previous bank lending to the sector.
The money will be used to support Network Homes' substantial development programme. Network is committed to starting at least 1,752 homes in London by 2021 through its Strategic Partnership with the Greater London Authority and is also building new homes in Hertfordshire under Homes England's Shared Ownership and Affordable Housing Programme. Network's total development pipeline comprises 3,000 homes.
Mark Wells, Head of Structured Debt Capital Markets for MUFG in EMEA, said:
"Following the establishment of a lending relationship in 2017, MUFG is delighted to have been able to assist Network Homes with the placement of its inaugural private placement transaction. The North American PP market is an alternative liquidity source which we believe will be important to UK housing associations as diversity of funding becomes increasingly relevant to the sector as a whole."
The coupon on the unsecured 15-year £25m notes was 3.52%, little different to the rate on the longer-term secured debt.
Barry Nethercott, Network Homes' Executive Director of Finance and Governance when the deal was struck, added:
"The North American markets have been showing keen pricing and excellent flexibility of approach of late and we wanted to take advantage of those conditions to deliver on a number of corporate objectives. In particular, we wanted to smooth out our debt repayment profile by creating a good range of maturities, focusing on time points where we had little else to repay, and it seemed sensible to also consider a small level of unsecured funding, where we could be more flexible about the assets we set against it."