1st Oct

A2Dominion Group builds for the future with 4.75%pa bond launch

After a period of relative inactivity in the primary market over the Summer, housing association A2Dominion Group (A2D) became the seventh company to launch on ORB in 2013 when it today announced its nine year retail bond offering 4.75% paid semi-annually in arrears.

Its decision to come to market followed the successful conclusion of a series of presentations to brokers and wealth managers delivered in concert with joint lead managers on the issue, Lloyds Bank and Canaccord Genuity. A2D is one of the largest housing associations in the UK by value and size, owning and managing over 34,000 units in London and the South East.

Its business divides between social, including affordable housing, shared ownership and sheltered accommodation, and market rate student, private rented and property for sale.

Profit for Purpose

At a presentation to investors at the London Stock Exchange yesterday (Sept 30th) Group Deputy CEO, John Knevett, described the company as having ‘utility-like’ cashflows, and it’s operating model as being ‘profit for purpose’ – a commercially run not-for-distribution business that reinvests surplus to improve existing housing stock and deliver further affordable housing in line with its charitable status.

Housing associations represent the highest rated UK sector outside government and although the bond is unsecured, it is AA- rated by Fitch and is intended to fund development in sectors where demand consistently outstrips supply.

To ensure ISA eligibility, the bond will be issued by A2D Funding Plc, and fully guaranteed by charity A2Dominion Housing Group Ltd; the bond is senior unsecured debt and is issued in denominations of £100 with a minimum subscription of £2,000.

The subscription period begins today and is planned to end on 15th October, although the offer may be closed early subject to high levels of demand which would be announced by RNS; settlement is three days later with the bond maturing on 18th October 2022.

Diversifying Debt Portfolio

A2D’s total housing stock is currently valued at £2.1b and with total secured debt £1.1b, the company has excess asset value of £1b; it is looking to diversify its debt portfolio which is currently typified by long dated, low interest bank lending.

The company plans to develop up to 1,500 units per annum from 2016.

Mr Bond considers that A2D operates in areas of significant demand, has long-term, stable cash-flows, and has a conservatively valued portfolio of assets. The business offers increasingly diverse income streams, benefits from a simple business model and stable management and the bond itself is offered with a high credit rating.

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