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Case Study

£250M fundraising and A+ credit rating for Karbon Homes

Summary

A case study of how Chatham advised one of the largest housing associations in the North of England on its credit rating and £250M fundraising.


Key highlights

  • £250M in long-term financing raised
  • 153bps margin of landmark debut
  • A+ rating achieved

Background

  • Karbon Homes is one of the largest housing associations in the North of England, owning and managing nearly 30,000 homes.
  • Karbon was planning to build more homes in the North-East, for which it requires up to £250M in long-term funding.
  • Karbon had a number of relatively high-cost bank facilities in place, for which it was seeking cheaper, long-term funding.

Our approach

  • Chatham worked with Karbon for 12 months to develop a suitable financing solution, including a short-term bank facility.
  • For long-term funding, a public bond or private placement were deemed the best solutions, though choosing a particular market was difficult given market volatility.
  • Chatham advised on the selection of joint lead managers, who were able to execute in either market to provide flexible decision making.
  • Chatham analysed the current market, potential pricing, and flexibility of each option, advising Karbon that a public bond issue would achieve the best outcomes.
  • A rating was required to issue a public bond, and Chatham assisted Karbon in achieving an A+ rating, currently the highest credit rating in the North-East.

Benefits

  • Karbon was able to achieve longer-term funding than it would have from banks, with a 29-year all-in rate of 3.50% for £150M raised, and £100M retained for future sale, without any corporate covenants.
  • Karbon was able to repay some of its more expensive bank facilities, reducing long-term interest costs, allowing Karbon to build more homes.
  • Strong debut issue, reflecting substantial investor appetite for Karbon and the North-East.
  • This initial issue provides a good foundation for future capital markets investments.

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Disclaimers

This material has been created by Chatham Financial Europe, Ltd. and is intended for a non-U.S. audience. Chatham Financial Europe, Ltd. is authorised and regulated by the Financial Conduct Authority of the United Kingdom with reference number 197251.