10 Oct 2013

Deferred Funding: Long Term Finance Without Carry Cost

Deferred Funding Bond (1)Deferred Funding BondDeferred funding provides a route for borrowers to access long term finance while minimising cost of carry. The structure, which was pioneered on Knightstone’s £100m bond issue in September 2013, allows the borrower to draw down funding on a pre-agreed schedule so that funds arrive as they are needed.

The Knightstone Bond was the first of its kind in the social housing sector, as it has been issued with an extended deferral of drawdown, meaning that Knightstone only drew £1million on day one. Another £49 million will be received in November 2017 and a further £50 million of the bonds has been retained by Knightstone to sell to investors in the future.

This note provides background on deferred funding and its benefits to debt issuers.

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