Retail bond launched paying 4.75%
One of the largest UK housing associations has launched a nine-year retail bond paying a coupon of 4.75%.
A2D Funding provides housing in London and the south east, and currently has a portfolio of 34,000 properties with many more in development. It specialises in affordable housing and market rate rentals, as well as providing accommodation for key workers, students and vulnerable people.
The company has an AA-rating from agency Fitch, and enjoys 'utility-like cash flow' according to stockbroker Redmayne-Bentley, which is handling the issue along with Canaccord Genuity and Lloyds Bank.
Lauren Charnley, stockbroker at Redmayne-Bentley, says: "Aided by government-backed grants, an ambitious development strategy to help ease the social housing problem and the strong rating from Fitch, an early close would not come as a surprise." However, Redmayne-Bentley adds there are risks "in the event that A2D has problems meeting its financial obligations".
Dean Tufts, executive director at A2D, says the issue "will support our provision of high quality housing services and allow us to further invest in both affordable homes and housing let on the open market".
A2D has not said how much it is hoping to raise from the issue but that is hopes it will be of a similar size to the retail bond issued by Places for People, which raised £140 million when is launched in January 2012.
Minimum investment is £2,000 with further purchases available in increments of £100. Interest is paid twice annually in on 18 April and 18 October each year, with the first payment on 18 April 2014. The maturity date is 18 October is 2022.
The issue is expected to close on 15 October, with trading on the stockmarket from 18 October.
This article was written for our sister website Money Observer