£250M fundraising and A+ credit rating for Karbon Homes
Real Estate | London
SummaryA case study of how Chatham advised one of the largest housing associations in the North of England on its credit rating and £250M fundraising.
£250M in long-term financing raised
153bps margin of landmark debut
A+ rating achieved
- 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.
- 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.
- 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.
Get in touch
Please complete the form below to find out more about the topics discussed in this case study.
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.
Our featured insights
Q4 2022 Business Plan Assumptions
Chatham’s social housing team set out below its Q4 2022 business plan assumptions for housing associations and an accompanying economic commentary. Following a tumultuous third quarter in the Sterling markets, a new government and reverse of the “mini” budget induced a much-needed calm after the...
The hairy chart: Historical accuracy of LIBOR forward curves
These hairy chart graphs plot past LIBOR forward curves against the actual path LIBOR followed, showing that the forward curve has been a somewhat accurate predictor over the next six months or so...
The ECB holds firm while the BoE wavers
On 15 December, the European Central Bank (ECB) voted for a further 0.5% interest rate increase as the central bank continues its policy of monetary tightening in the face of high inflation. The bank slightly slowed the pace of increases (from 0.75% previously) as signs of a softening inflation...
A downshift in hikes but more to come in 2023
On Wednesday, December 14, the Federal Open Market Committee (FOMC) voted unanimously to raise the federal funds target range by 50 basis points to 4.25–4.50%. This rate hike is guided by their long-term dual mandate of price stability while simultaneously ensuring maximum employment. The Fed is...
The first 75 bps hike from the Bank of England in 33-years in a split vote
On 3 November, the Bank of England (BoE) voted seven-to-two to raise the U.K. base rate by 0.75% to 3.00%, the two dissenters voting instead for hikes of 0.25% and 0.50%. The BoE Governor, Andrew Bailey, voted for the 0.75% hike while pointing to a slowdown in the pace of future hikes. This move...
Inflation persists despite historically fast hikes
On Wednesday, November 2, the Federal Open Market Committee (FOMC) voted unanimously to raise the federal funds target range by 75 basis points to 3.75–4.00%. This rate hike is guided by their long-term dual mandate of price stability and simultaneously ensuring maximum employment. The Fed is...
Video Q&A with NYU's Dr. Sam Chandan
Matt Henry, Chatham's Managing Partner and CEO, sat down with Dr. Sam Chandan, Director of the Center for Real Estate Finance at the NYU Stern School of Business and founder of Chandan Economics, a leading provider of economic advisory and data science services to commercial real estate...
“Springing” interest rate cap requirements in CRE loans
“Springing” interest rate caps are a type of loan requirement that requires a CRE borrower to purchase an interest rate cap post loan closing if (and only if) the base rate for a floating-rate loan (like SOFR) crosses a certain threshold (often called the “trigger”). This structure permits the...