Leading law firm Harper Macleod has advised Kingdom Housing Association (KHA) on an £85 million funding package under a debut private placement which secures its development programme of over 1,100 homes until the end of 2019-20.
This is the latest in a number of private placement transactions which the housing team at Harper Macleod has successfully delivered for Scottish housing association clients, helping them access long-term funding from institutional investors at attractive rates. To date, Harper Macleod's specialists have advised on private placements which have raised an approximate total investment of £360 million.
The funding package amounted to £85 million of borrowing which is being provided by institutional investors jointly for a period of 30 years with repayment in 2048 and 2049.
The borrowing, which is secured against KHA's housing assets, is to be used for Kingdom’s development programme and to repay £10 million of existing short-term debt placing it on a competitive long term rate.
Harper Macleod's team, led by Partner and Head of Housing Derek Hogg and Senior Associate Collette Miller, acted in all aspects of the transaction, providing legal advice to KHA throughout the project, acting as "issuer counsel" to KHA as the issuer of the £85m loan notes, helping to negotiate and finalise the finance documents, and undertaking a security exercise which involved putting 75 separate housing developments into a security trust.
The firm also provided advice and support to KHA's board and short life working group of board members, meeting with them to help them understand the nature and structure of the project, how to manage key risks, selection of the preferred investors, and relevant governance issues.
Derek Hogg said: "We are delighted to have assisted Kingdom on this transaction, which will allow it to deliver on its ambitious plans for affordable new homes in Fife. Thanks to well-run organisations such as KHA, the Scottish social housing sector has proven to be very attractive to institutional investors, and we hope to see this continue.
"Our experience in such deals over recent years has made us the go-to law firm for Scottish housing providers looking to raise funding and we are grateful that Nick Pollard and the team at Kingdom placed their confidence in us guiding them through this transaction."
Nick Pollard, Director of Corporate Support Services who is responsible for finances at Kingdom, said, “This is a significant milestone in the history of Kingdom. The investor appetite we have seen for the proposals that Kingdom took to market is a massive vote of confidence in Kingdom’s financial strength, its future financial and growth plans, the governance and management of the organisation and its staff but most importantly our tenants and customer now and of the future.”
Nick added: “In our view there is no doubt that our being assisted in this transaction by the team at Harper Macleod, which is renowned for its expertise in the Scottish market place, at a very early stage and then once engaged throughout the process to completion has made what was an intense experience one which has been delivered in extremely quick order. Based on our experience we are certain that Harper Macleod will continue to support future transactions in the sector and we have no hesitation in recommending them to our colleagues in the sector."
Kingdom’s private placement is unprecedented in the Scottish sector for its size and the strength of investor interest. Kingdom’s funding package is being provided on the basis of an immediate drawdown of £35 million and a further drawdown of £50 million 12 months after the initial drawdown.
KHA secured significant interest from several investors, resulting in a heavily oversubscribed bid book and all the offers were all at competitive rates and terms. Margins were exceptionally competitive coming in at a level which was comparable to recently issued public bonds and existing trading levels of sector comparables in both the public bond and private placement market.
Kingdom was also supported in the transaction by the team at NatWest Markets as lead arranger, while Treasury Management support was provided by QMPF LLP’s team in Edinburgh.