£250m boost for East Lancashire housing project

First published in News

AMBITIOUS housebuilding plans for East Lancashire will be boosted by a £250million bond issue by the region’s largest social landlord.

Together Housing, which oversees Twin Valley, Housing Pendle and Green Vales Homes, has staged a successful capital-raising assault on the money markets.

Their 30-year bond, with a 4.5 per cent rate of return for investors, was heavily oversubscribed when it was unveiled on Thursday.

Around £200million worth of bonds were issued on the first day and orders of £1billion were placed. The remaining bonds are also expected to attract similar levels of interest.

The outfit, which was only formed two years ago, had earlier secured a AA3 rating, signifying a ‘high-quality and low credit risk’ investment option.

Victor Flynn, the firm’s corporate funding group director, said: “The bond issue will provide us with funding to build new homes, to take advantage of new opportunities, and to grow and develop our business in many new and exciting ways.”

Work has begun this week on a joint Together and PlaceFirst scheme to renovate 200 homes in the Woodnook area of Accrington.

And earlier this year Together confirmed it was intending to build 249 ‘social housing’ properties across Hyndburn, Pendle and Rossendale.

Using part of a £15million grant from the Housing and Communities Agency grant, the largest single project was for Twin Valley, promising 116 homes for sale, and another 56 shared ownership homes.

Another 51 properties are anticipated for Pendle and 20 rental and shared ownership houses will be constructed in Rossendale.

The company has also been named as the prefered bidder for a £430million contract to overhal the Pendleton area of Salford.

Comments (8)

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3:50am Sun 9 Dec 12

2 for 5p says...

good luck with your venture .

hopefully you will develop some areas of the new Skemersdale (Ribble valley) theres a lot of building going on there at the moment.
good luck with your venture . hopefully you will develop some areas of the new Skemersdale (Ribble valley) theres a lot of building going on there at the moment. 2 for 5p
  • Score: 0

7:11am Sun 9 Dec 12

Kevin, Colne says...

Who on earth has bought these bonds?

Maybe I’m missing something here but as I see things the bald facts are:

Rating: AA3 is the lowest of the highest grade rating.

Coupon: 4.5% but the RRR – Real Rate of Return – based on CPI of 2.7% is 1.8%, and based on RPI at 3.2% the RRR falls to 1.3%.

So you’re lending money for 30 years at a current yield of 1.3%, presumably this is gross.

If inflation runs at 2.3% per annum for 30 years when the bond matures your money is then returned to you and guess what? The purchasing power of each Pound that you lent will be all of 50 pence. That’s right: It’ll have halved.

The real story here is to find the institutions that bought these bonds and ask them what on earth were thinking? I say this because I have read reports elsewhere that within an hour of launch there was £1bn on the order book.

Perhaps institutions are being forced by regulators to improve their risk profile by increasing the proportion of assets held in bonds. Maybe the answer might be that the return is better than ‘gilts’, but that’s not saying a right lot is it? And in any case, the additional coupon comes with additional risk, hence the rating of AA3.

If mainstream retail financial funds have bought them then pity the poor investors in the fund because after fund charges the likelihood is that the return delivered to ‘The Little Old Lady from Fleetwood’ – to use BBC Radio Lancashire’s Joe Wilson’s wonderful and immortal phrase – who may have entrusted her savings with them is going to be all of 0.3% with quite possibly a 50% loss in real value of every Pound of her savings thrown in for good measure.

This is what financial repression looks like - the prudent get taken to the cleaners.

This looks to me like one for the ‘No’ bucket.
Who on earth has bought these bonds? Maybe I’m missing something here but as I see things the bald facts are: Rating: AA3 is the lowest of the highest grade rating. Coupon: 4.5% but the RRR – Real Rate of Return – based on CPI of 2.7% is 1.8%, and based on RPI at 3.2% the RRR falls to 1.3%. So you’re lending money for 30 years at a current yield of 1.3%, presumably this is gross. If inflation runs at 2.3% per annum for 30 years when the bond matures your money is then returned to you and guess what? The purchasing power of each Pound that you lent will be all of 50 pence. That’s right: It’ll have halved. The real story here is to find the institutions that bought these bonds and ask them what on earth were thinking? I say this because I have read reports elsewhere that within an hour of launch there was £1bn on the order book. Perhaps institutions are being forced by regulators to improve their risk profile by increasing the proportion of assets held in bonds. Maybe the answer might be that the return is better than ‘gilts’, but that’s not saying a right lot is it? And in any case, the additional coupon comes with additional risk, hence the rating of AA3. If mainstream retail financial funds have bought them then pity the poor investors in the fund because after fund charges the likelihood is that the return delivered to ‘The Little Old Lady from Fleetwood’ – to use BBC Radio Lancashire’s Joe Wilson’s wonderful and immortal phrase – who may have entrusted her savings with them is going to be all of 0.3% with quite possibly a 50% loss in real value of every Pound of her savings thrown in for good measure. This is what financial repression looks like - the prudent get taken to the cleaners. This looks to me like one for the ‘No’ bucket. Kevin, Colne
  • Score: 0

9:27am Sun 9 Dec 12

Graham Hartley says...

"If inflation runs at 2.3% per annum for 30 years when the bond matures your money is then returned to you and guess what? The purchasing power of each Pound that you lent will be all of 50 pence. That’s right: It’ll have halved."

Not quite halved, Kevin. The factor is 0.5055+, leading to fifty and one-half pennies. Bad enough, I agree.
"If inflation runs at 2.3% per annum for 30 years when the bond matures your money is then returned to you and guess what? The purchasing power of each Pound that you lent will be all of 50 pence. That’s right: It’ll have halved." Not quite halved, Kevin. The factor is 0.5055+, leading to fifty and one-half pennies. Bad enough, I agree. Graham Hartley
  • Score: 0

9:33am Sun 9 Dec 12

GAC says...

now if only the local authorities were as busy at getting new business setup in east lancashire so all these homes will have people in them with jobs.
now if only the local authorities were as busy at getting new business setup in east lancashire so all these homes will have people in them with jobs. GAC
  • Score: 0

10:09am Sun 9 Dec 12

lightamatch catcharabbit says...

Just to pad this out a little, the reason why housing associations are increasingly looking to the bond market is the restriction in access to bank funding that has been their traditional way of financing until now. Banks are only offering short term lending (up to 5 years typically), the loans are priced higher and the banks are looking to re-price existing loans as a condition of refinancing. A 30-year bond provides more certainty and allows associations to plan more long-term - 30 years is typically the period of their financial business plans. Also, when investing this money in new developments, the break even point will be around 25 to 30 years after grant, depending on the equity sales receipts which often fund the rented element.
Just to pad this out a little, the reason why housing associations are increasingly looking to the bond market is the restriction in access to bank funding that has been their traditional way of financing until now. Banks are only offering short term lending (up to 5 years typically), the loans are priced higher and the banks are looking to re-price existing loans as a condition of refinancing. A 30-year bond provides more certainty and allows associations to plan more long-term - 30 years is typically the period of their financial business plans. Also, when investing this money in new developments, the break even point will be around 25 to 30 years after grant, depending on the equity sales receipts which often fund the rented element. lightamatch catcharabbit
  • Score: 0

3:06pm Sun 9 Dec 12

Wishingwell says...

I totally agree with everybody on here. I thought they may have received extra interest from the local government pension funds now that they have had their rules changed. Personally I wouldn't touch them with a barge pole their build quality is dreadful (probably only last 30 years) and their customers are always the ones who cant afford to move in without state help of some sort. As we are looking at further cut backs its difficult to see how they have a business model going forwards.
I totally agree with everybody on here. I thought they may have received extra interest from the local government pension funds now that they have had their rules changed. Personally I wouldn't touch them with a barge pole their build quality is dreadful (probably only last 30 years) and their customers are always the ones who cant afford to move in without state help of some sort. As we are looking at further cut backs its difficult to see how they have a business model going forwards. Wishingwell
  • Score: 0

11:07pm Sun 9 Dec 12

DEO VOLENTE says...

Good luck to TVH and Together housing. This would never have happened when "New labour" traitors were in power! I hope that Mrs and Mrs Balls RRRRRRRread this MMMMMMMMessage and I hope That Mrs BBBBBBBBBBBBalls can offer some CCCCCCCCCCCC omfort to her poor, politically disorintated HHHHHHHHHubsband. Good luck the BBBBBBBBBBallses and all the BBBBBBBBBalls language they talk. By the way did you see poor old Eddie Milliband "Raymond" the unions boy looking like a rabbit in the headlights! Laugh I nearly started. What an utter disgrace an example of the poor pathetic "New Labour" lamentable shambles, Go George and Dave all the way, there is nothing to lose except your shackles of a past "New Labour" failure.

Deus Vobiscum.

P.S. Can someone please enlighten me as to who Katie Hollerer is?
Good luck to TVH and Together housing. This would never have happened when "New labour" traitors were in power! I hope that Mrs and Mrs Balls RRRRRRRread this MMMMMMMMessage and I hope That Mrs BBBBBBBBBBBBalls can offer some CCCCCCCCCCCC omfort to her poor, politically disorintated HHHHHHHHHubsband. Good luck the BBBBBBBBBBallses and all the BBBBBBBBBalls language they talk. By the way did you see poor old Eddie Milliband "Raymond" the unions boy looking like a rabbit in the headlights! Laugh I nearly started. What an utter disgrace an example of the poor pathetic "New Labour" lamentable shambles, Go George and Dave all the way, there is nothing to lose except your shackles of a past "New Labour" failure. Deus Vobiscum. P.S. Can someone please enlighten me as to who Katie Hollerer is? DEO VOLENTE
  • Score: 0

11:15pm Sun 9 Dec 12

Good call says...

DEO VOLENTE wrote:
Good luck to TVH and Together housing. This would never have happened when "New labour" traitors were in power! I hope that Mrs and Mrs Balls RRRRRRRread this MMMMMMMMessage and I hope That Mrs BBBBBBBBBBBBalls can offer some CCCCCCCCCCCC omfort to her poor, politically disorintated HHHHHHHHHubsband. Good luck the BBBBBBBBBBallses and all the BBBBBBBBBalls language they talk. By the way did you see poor old Eddie Milliband "Raymond" the unions boy looking like a rabbit in the headlights! Laugh I nearly started. What an utter disgrace an example of the poor pathetic "New Labour" lamentable shambles, Go George and Dave all the way, there is nothing to lose except your shackles of a past "New Labour" failure.

Deus Vobiscum.

P.S. Can someone please enlighten me as to who Katie Hollerer is?
Bloody hell,have you still not woke up yet that politicians are simply puppets of the REAL elite.
[quote][p][bold]DEO VOLENTE[/bold] wrote: Good luck to TVH and Together housing. This would never have happened when "New labour" traitors were in power! I hope that Mrs and Mrs Balls RRRRRRRread this MMMMMMMMessage and I hope That Mrs BBBBBBBBBBBBalls can offer some CCCCCCCCCCCC omfort to her poor, politically disorintated HHHHHHHHHubsband. Good luck the BBBBBBBBBBallses and all the BBBBBBBBBalls language they talk. By the way did you see poor old Eddie Milliband "Raymond" the unions boy looking like a rabbit in the headlights! Laugh I nearly started. What an utter disgrace an example of the poor pathetic "New Labour" lamentable shambles, Go George and Dave all the way, there is nothing to lose except your shackles of a past "New Labour" failure. Deus Vobiscum. P.S. Can someone please enlighten me as to who Katie Hollerer is?[/p][/quote]Bloody hell,have you still not woke up yet that politicians are simply puppets of the REAL elite. Good call
  • Score: 0

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