North East housing association (HA) Bernicia has become the latest landlord borrower to take advantage of low gilt yields by agreeing a largely deferred private placement with Legal & General (L&G) subsidiary LGIM Real Assets.
Bernicia has borrowed £75m over a 33-year term, with £55m of that total deferred. The loan amortises from year 23.
Neither party disclosed pricing on the deal, although long-term UK gilt yields are tracking historically low.
“What we can say is that they [Bernicia] were taking advantage of low gilt yields and so were tapping the market at a time when it was advantageous to do so,” said Steve Bolton, head of corporate private debt for Europe at LGIM Real Assets.
The deal comes after L&G arranged a £100m deferred private placement for Bromford in June. Mr Bolton acknowledged that deferred drawing was likely to continue to be a popular means of treasury management while yields were low.
“Given that we continue to be in a very low gilt yield environment, it’s understandable that there’s often a desire to lock in pricing at the current time and take advantage of that,” he said. “And obviously delaying the drawing often makes sense from a treasury management perspective.”
The proceeds from the placement will support 16,000-home Bernicia’s plans to build 650 affordable homes over the next three years.
Janette Longstaff, executive director of finance at Bernicia, said: “This important investment from Legal & General Investment Management – as the sole investor in the deal – represents a huge vote of confidence in Bernicia’s financial strength as well as the wider North East economy.
“It allows us to secure long-term funding at very favourable rates thanks to our strong financial standing and excellent governance.
“The funds, which will be provided in three drawdowns over a two-year period, allow us to not only meet our corporate strategic objectives, but to go much further, enabling us to explore strategic opportunities with our local authority partners, support local supply chains and create more opportunities for the people of the North East.”
The placement was arranged by Centrus. Addleshaw Goddard acted as L&G’s legal advisor, while Trowers & Hamlins acted for Bernicia.