Landmark Circle Anglia £110M bond issue gives boost to non-bank distribution channels
Long dated bond issues from the UK housing association sector are rarely headline grabbing events, but in a major break with market convention, corporate finance and investment firm TradeRisks has acted as arranger and sole bookrunner for a £110m Circle Anglia 2038 Sterling Eurobond issue.
The Aa3 rated Circle Anglia bond was issued at 110 basis points over gilts, which is the same level as the last Aa3 rated housing association issue from Notting Hill Housing Trust. This was in spite of the more difficult conditions within the European debt markets and with investors still digesting the implications of the UK Government’s recent Comprehensive Spending Review on the housing sector.
For issuers wishing to access institutional investors in the bond market, the process has traditionally been run and managed by large investment banks as a legacy of their role in providing underwriting and secondary market liquidity. However, in many parts of the market, particularly for long dated maturities, banks neither provide underwriting nor liquidity, and often ensure their involvement in bond transactions by making it an implicit (and sometimes explicit) condition to their continuing lending relationship with the borrower.
This transaction is aligned with moves by the Bank of England and HM Treasury to support the creation of non-bank distribution channels for funding and hedging.
Alex Pilato, Chief Executive, TradeRisks commented: “This transaction, combined with the £1bn swaps executed through our derivatives platform, OTC Exchange, demonstrates that corporates and investors can achieve their borrowing, investment and risk management objectives by transacting outside banks’ balance sheets. It also provides a model for a financial system less dependent on banks which, unlike end-users, are the source of systemic risk”
Calum Mercer, Finance Director, Circle Anglia commented: “Circle Anglia believes that strong and direct relationships with our investors are important to ensure that we can deliver more. The transparent way in which TradeRisks managed the issue process delivered a very good outcome for Circle Anglia and its investors and provided excellent value for money.”