L&Q debut bond issue attracts over £1billion in subscriptions

London based housing association L&Q today raised £300m via a debut bond issue priced at Gilts plus a spread of 1.15%. The Aa2/AA- rated 30 year bullet repayment deal was three and a half times over-subscribed within an hour of hitting the markets, making it the most popular bond issue from the RSL sector in recent times.

L&Q, which owns and manages over 63,000 homes in London and the South East, was seeking the £300 million of private funding to support development plans for 10,000 homes over the next 5 years. Investors have clearly signalled their approval for the plans with over £1 billion worth of subscriptions registered to the issue.

Speaking about the issue, L&Q’s Group Director of Finance, Waqar Ahmed said:

“We are delighted that investors have shown such positive interest in the issue. The money raised through this issue will go towards our development program which we will undertake over the next five years. The additional investment ensures that we will continue to lead the way in building much-needed homes and creating desirable neighbourhoods in London and the South East.

“L&Q is a not-for-profit organisation and every penny of our surplus is invested back into building more homes and communities. We have a strong track record of delivery, financial strength, responsible growth and operational excellence which has clearly appealed to the City.”

The issue is a Fixed Rate bond paying a semi-annual coupon of 5.50% and was launched with Barclays Capital, Goldman Sachs and Royal Bank of Scotland acting as joint bookrunners.

Martin Watts, Head of Treasury added:

“Following a three day roadshow meeting in excess of 40 investors, L&Q acted immediately to bring this deal to market given anticipated demand. Our ability to demonstrate our underlying operating and financial strength allowed us to price at Gilts plus 1.15% following initial guidance in the Gilts plus 1.20% area. In addition L&Q has, over the course of the past three months, entered in to a number of Gilt pre-hedges that has bought down the effective yield to maturity to 5.42%”.

The deal marks a new low in credit spreads paid by a housing association since the onset of the credit crisis, coming 10-25bps inside of secondary long dated housing association bonds. The deal is secured on a pool of properties and benefits from an asset cover covenant of (EUV-SH 1.05x / MV-ST 1.15x).

“In all it means L&Q start 2010 in a very good position. Our efficient business and management procedures, strong governance, low arrears and consistent appearance in the Sunday Times Top 100 employers list all point to a success story that investors have been willing to back.” Waqar added.

Notes to Editors

 L&Q (London & Quadrant Housing Trust) manages more than 63,000 homes across London and the South-East, and builds around 1,100 new homes each year. It is a not-for-profit housing association, overseen by a voluntary governing board. It is an exempt charity.

L&Q generates income from a mix of rents, Government funding and private finance.

For further information please contact:

Chris Middleton
Head of Communications
DDI: 0844 406 9000 ext 5151 
Mobile: 07905 826356
Email: cmiddleton@lqgroup.org.uk