L&Q successfully completes £250 million bond issuance
Published on 15/10/2020
L&Q, one of the UK's largest housing associations with over 105,000 owned or managed homes, has successfully completed a £250 million bond issuance.
Following the onset of Covid-19, L&Q proactively established a £300m commercial paper programme under the Covid Corporate Financing Facility to bolster its short term liquidity. Following on from this, L&Q turned its attention to establishing its £2.5bn EMTN programme and this issuance signifies the debut issuance from the EMTN as well as its return to the sterling bond market. This is L&Q’s first benchmark issuance since February 2018, building on the strong track record L&Q has in the sterling market, with over £2.4bn of outstanding bonds.
The EMTN programme provides L&Q with agility and speed of market access, simplifies the security charging process and provides flexibility in its approach to multiple markets.
L&Q decided to approach the sterling market with a transaction targeting the intermediate tenor range (15-18 years) to complement its existing bonds and to provide a different offering to investors, noting the level of long dated housing association transactions completed in the market during 2020.
Following a busy day of marketing with strong investor engagement L&Q proceeded with an 18-year £250m (no grow) secured bond, which was very well received by the market. This enabled L&Q to tighten pricing significantly to print the transaction at Gilts +140bps, giving a coupon payable at 2.000%, signifying a zero basis point new issue concession. The transaction was 3.6x oversubscribed, with over £890m of investor orders at the final spread level.
The coupon payable is the lowest coupon achieved by L&Q to date. Proceeds will be used for general corporate purposes. The bonds are secured over social housing assets with an asset cover test of EUV-SH / 105% + MV-ST / 115%.
Commenting on the bond issuance, Waqar Ahmed, Group Director of Finance, said:
“We are delighted with the successful placement of a further £250m of bonds which has allowed us to meet our stated objectives whilst further strengthening our liquidity position. The extensive interest from, and take up by new and existing investors demonstrates the confidence of those investors in our commitment to our social purpose, vision and values that are supported by our strong credit fundamentals, effective governance and our ability to adapt.”
Martin Watts, Director of Treasury, added:
“L&Q were very clear on their objectives for this transaction – flexibility of maturity to maximise investor reach and to re-position L&Q in the market after a period since the last benchmark issuance, utilising the EMTN for speed of access with new numerical apportionment security pool.
The diversity of investor was clear – with 65 investors participating in the final order book including some new investors to L&Q in primary that further outlines the strategic benefit of an investor engagement strategy”
This bond was placed by MUFG (Investor Presentation), NatWest Markets (Documentation & Billing & Delivery) and RBC (Roadshow logistics) as joint bookrunners. Rothschild & Co acted as financial advisors to L&Q, CBRE conducted the valuation and Allen & Overy LLP was appointed as legal counsel to the joint bookrunners. Devonshires Solicitors LLP was appointed as legal counsel to L&Q.
Following the onset of Covid-19, L&Q proactively established a £300m commercial paper programme under the Covid Corporate Financing Facility to bolster its short term liquidity. Following on from this, L&Q turned its attention to establishing its £2.5bn EMTN programme and this issuance signifies the debut issuance from the EMTN as well as its return to the sterling bond market. This is L&Q’s first benchmark issuance since February 2018, building on the strong track record L&Q has in the sterling market, with over £2.4bn of outstanding bonds.
The EMTN programme provides L&Q with agility and speed of market access, simplifies the security charging process and provides flexibility in its approach to multiple markets.
L&Q decided to approach the sterling market with a transaction targeting the intermediate tenor range (15-18 years) to complement its existing bonds and to provide a different offering to investors, noting the level of long dated housing association transactions completed in the market during 2020.
Following a busy day of marketing with strong investor engagement L&Q proceeded with an 18-year £250m (no grow) secured bond, which was very well received by the market. This enabled L&Q to tighten pricing significantly to print the transaction at Gilts +140bps, giving a coupon payable at 2.000%, signifying a zero basis point new issue concession. The transaction was 3.6x oversubscribed, with over £890m of investor orders at the final spread level.
The coupon payable is the lowest coupon achieved by L&Q to date. Proceeds will be used for general corporate purposes. The bonds are secured over social housing assets with an asset cover test of EUV-SH / 105% + MV-ST / 115%.
Commenting on the bond issuance, Waqar Ahmed, Group Director of Finance, said:
“We are delighted with the successful placement of a further £250m of bonds which has allowed us to meet our stated objectives whilst further strengthening our liquidity position. The extensive interest from, and take up by new and existing investors demonstrates the confidence of those investors in our commitment to our social purpose, vision and values that are supported by our strong credit fundamentals, effective governance and our ability to adapt.”
Martin Watts, Director of Treasury, added:
“L&Q were very clear on their objectives for this transaction – flexibility of maturity to maximise investor reach and to re-position L&Q in the market after a period since the last benchmark issuance, utilising the EMTN for speed of access with new numerical apportionment security pool.
The diversity of investor was clear – with 65 investors participating in the final order book including some new investors to L&Q in primary that further outlines the strategic benefit of an investor engagement strategy”
This bond was placed by MUFG (Investor Presentation), NatWest Markets (Documentation & Billing & Delivery) and RBC (Roadshow logistics) as joint bookrunners. Rothschild & Co acted as financial advisors to L&Q, CBRE conducted the valuation and Allen & Overy LLP was appointed as legal counsel to the joint bookrunners. Devonshires Solicitors LLP was appointed as legal counsel to L&Q.