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Case Study

£250M public bond and A+ credit rating for Incommunities


A case study of how Chatham advised Leeds housing association Incommunities on its £250M public bond issue and credit rating, to accommodate its aspirations for future expansion.


Incommunities is one of the largest social housing providers in the Leeds City Region. It was formed in 2003 with the transfer of 24,000 homes from Bradford Metropolitan District Council.

Since then Incommunities has acquired Sadeh Lok, a local BAME Housing Association and embarked on an asset management programme designed to develop “the right stock in the right location.”

While it has enjoyed good relationships with its existing banks, the debt portfolio was largely unchanged since the transfer. The existing debt portfolio was not entirely suited to the future ambitions of the group and the cost of debt was significantly above current market levels.

As a consequence, Incommunities embarked on a detailed financial review, designed to:

  • Reduce the cost of funding
  • Increase the maturity of the debt
  • Diversify the sources of funding
  • Improve security efficiency and
  • Accommodate the aspirations of the board for future expansion

Our approach

Chatham was hired to advise Incommunities following a competitive tender process.

We conducted a six-stage process designed to ensure that Incommunities obtained a cost effective and fit-for-purpose debt portfolio:

  • Detailed analysis of the strengths and weaknesses of the existing debt portfolio
  • Review of the funding alternatives available to Incommunities
  • Costed the benefits of any restructuring and refinancing using a wide range of analytical tools
  • Built a new aspirational business plan which reflected the new structure and cash flow benefits arising from the restructured debt portfolio
  • Developed a strategy to ensure best execution on the restructuring which included advising on the process of acquiring a credit rating for the first time

The solution involved:

  • Restructuring the majority of the existing bank debt
  • Raising new revolving credit facilities
  • Upgrading the credit standing of the business
  • Issuing a public market bond for £200M
  • Cancelling 22 separate derivatives

In the process, Incommunities significantly reduced the average cost of debt, released 30% of the security from charge and extended the average life of the debt to 22 years.

Chatham supported Incommunities and its board throughout this refinancing process including advising Incommunities on the approach to obtaining a credit rating.

As a result of the restructuring, Incommunities was assigned an A+ (negative) rating by S&P, which had a significant positive impact on pricing of both the bank and bond debt.

Chatham prepared a detailed tender document and approached four arrangers to act as lead managers on the public bond issue, assisted in the preparation of the investor presentation and advised on the establishment of a treasury vehicle within the group structure.


Incommunities now has a debt portfolio suited to the aspirations of its business:

  • Two bank lenders providing £155M of facilities to two different borrowers at tight margins and low commitment fees for maturities of between five to ten years
  • A £200M public bond for 30 years, priced at 157 basis points over the gilt to give a yield of 3.29%

In the process it has achieved a suite of covenants designed to suit the structure of the group, accommodate the requirements of the business plan and meet the aspirations of the board for the development of the business.

The reduction in interest costs achieved through the financing has increased retained earnings by at least 25% per annum, extended the average life of the debt and released resources that can be applied to the expansion of the Group.

30% of the security at Incommunities is now free from charge, providing a strong support base for future operations.

This is one of the largest refinancings undertaken in the sector in recent times. Its successful conclusion has left Incommunities free to continue to expand operations from a strong base.

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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.