• Debt Capital Markets


    Today's picture of the debt capital markets (DCM) for social housing is heavily influenced by what happened last year, explains Raj Jayaprakash, associate director, Corporate DCM, Lloyds Bank Commercial Banking


    2012 was a record year with more than £3bn of issuance. The background to that is many banks pulling back in terms of lending. Investors had a natural need for long-dated money and issuers could tap that source of funding at very attractive rates. There was a range of different issuers, with both small and large issuers active at this time.


    While 2012 marked the re-emergence of the capital markets to fund the social housing sector, this year has seen lower issuance. This is partly because most of those that had large funding needs had already done so and do not need to come back on a yearly basis.


    Social Housing DCM in 2013 


    In terms of broadly syndicated bond transactions, there have only really been three major transactions in 2013, all of which Lloyds Bank has been a bookrunner: a £140m transaction for Poplar HARCA; a £150m retail bond for A2Dominion; and a £150m transaction for Sanctuary. Overall the market is down this year, with well under £1bn of issuance.


    At Lloyds Bank, we have been working on smaller placements for our client base in the social housing space. As these institutions do not have the funding requirements for a bond issue, a major focus for us is in the private placement space, we have worked with six much smaller housing associations that have only needed £20-70m of funding.


    These housing associations can still get up to a 40 year funding with a limited pricing premium as these investors still need to put their money to work. These transactions are a natural fit with institutional investors as they have a natural demand for long dated, highly rated credit.


    The 2014 Market  


    Looking ahead, some of those who issued in 2012 will come back in 2014, while most of the larger issuers will come back in both 2014 and 2015. There are a couple of businesses we are talking to that should hopefully need benchmark transactions again over the coming twelve months, with a ‘benchmark transaction’ being an issuance of at least £250m.


    So far in 2013, we have not seen any such transactions but the signs we see are positive and that in the near future, we will witness an upturn. This may not take us to the levels that were witnessed in 2012, but rather to more normalised levels with housing associations seeking additional capital markets funding, but in a more confident and “normal” marketplace.

5/31/2020 8:53:02 PM