Centrus advises Orbit on £450m Bond – Largest issued by a UK Housing Association
On Thursday 7th June 2018, Orbit issued a 30-year GBP450m bond, the largest ever single-tranche transaction by a UK housing association. The transaction is Orbit’s second issue in the public market following its debut £250m 2045 bond in 2015.
Orbit is one of the largest housing groups in the UK with c.40,000 units under management across the Midlands, East Anglia and South East areas. Orbit has a strong track record in development and delivered 2,030 new homes last year of which 1,210 were social and affordable homes. Ratings agency Moody’s recently confirmed Orbit’s high A2 (negative outlook) credit rating.
The bond issue which came at a spread to gilts of 160bps and a yield of 3.46% was the culmination of a process initiated by Orbit to re-shape its treasury book with the intention of providing the group with the financial platform required to underpin its growth ambitions. This involved a series of negotiations with its Tier 1 relationship banks to amend key gearing and on-lending covenants for the Group which will provide greater capacity to support its aim of delivering 20,000 new homes over the next 10 years.
The four bookrunners on the transaction, Barclays, Lloyds, HSBC and Natwest Markets also provided a £300m syndicated bridging facility to allow repayment of legacy banking facilities and the breakage of related hedging.
Centrus advised Orbit on the development of the strategy, banking negotiations, structuring of the bridging facility, execution of hedge breakage and the debt capital markets process. This demonstrates the holistic advice provided by Centrus across corporate finance, banking, derivatives and debt capital markets.
Commenting on the transaction, Orbit Group Finance Director Joy Baggaley said: We set out to put in place stable, long-term funding to support our development programme and deliver much needed homes. The transaction went beyond a simple capital markets issue and involved refinancing existing debt, as well as arranging a bridge to the bond to ensure effective use of security. Centrus worked with us through every aspect of the process with the utmost professionalism, anticipating areas of risk, responding quickly and, most importantly, offering valuable advice in the decisions we had to make. It was a complex transaction, but we completed the deal successfully, meeting all our corporate finance and business objectives