Sovereign issues £175m bond at lowest price for five years
Sovereign Housing Group has completed a £175 million bond issue. The issue was priced at 155 basis points over gilts, at an all-price of 5.705 per cent – the lowest since 2004, according to TradeRisks managing director Phil Jenkins. TradeRisks acted as sole Bond Arranger for the issue.
The margin was the lowest since Affinity Sutton's issuance in 2008, just before Lehman Bros entered bankruptcy proceedings, a blow which triggered international financial instability.
The bond shared Sovereign HG's credit ratings of Aa2 (Moody's) and AA- (Standard & Poor's).
It was secured based on asset cover and corporate interest cover covenants.
Some 15 investors participated, including one which was new to the sector; the deal was oversubscribed.
Traderisks expanded its role from the traditional arranger task to include structuring and documenting the deal; bookrunner Lloyds then placed the issue.
The bank was awarded the role after a competitive tendering process.
Mr Jenkins said: 'By separating the structuring and arranging role from the distribution role Sovereign has been able to get a very competitive rate from the bank, as the book-runner's role is a fairly small part of the overall transaction.
'We have more expertise of the borrower issues and don't have banks' cost base.'
The tight interest rate margin reflected Sovereign's 'very strong and solid business position', Mr Jenkins added.
He said: 'There's a real hunger for assets at the long end of the market.'