It's the same old problem. There are lots of new issues in the sterling bond market. But the vast majority require an initial investment of £50,000 or £100,000, way beyond the reach of most private investors. In the meantime, older issues with smaller pieces are reaching maturity, or their issuers are tendering for them. John Lewis and Next have both tendered for small-denomination bonds only to replace them with large-denomination issues.
But in a rare piece of good news, housing association Places for People is currently speaking to a number of advisers with a view to launching a new bond. Housing associations are fairly frequent borrowers in the bond markets. The sector provides social housing, typically utilising a combination of ex-council and new-build housing stock (typically funded by government grants).
In the case of Places for People, the scale of the operation is substantial. Established in 1965, PFP has 60,000 homes on its books, assets of £2.9bn and annual turnover of over £300m. The company’s activities range across England, Scotland and Wales and encompass the development and construction of new homes, the provision of affordable rental property, shared equity schemes and assisted living. Full details of the company’s activities and its accounts can be found on the PFP website.
The pricing of the new bond has yet to be determined, but market sources indicate that the issuer is aiming for five- to 10-year maturity, and that the bond will be senior and unsecured with an estimated Aa3 rating. A recent institutionally-targeted long-dated issue from PFP saw 20 year bonds issued with a coupon of 5.875 per cent, some 175 basis points over gilts. However, with the new bond coming in somewhat shorter, the coupon is likely to be lower than that offered by the long-dated issue.
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