Newbridge has once again supported the housing associations sector in an innovative deferred funding exercise, this time for Optivo, who successfully raised c£150 million for settlement in 18 months. The transaction helps de-risk the business plan and further supports Optivo’s core aspiration in providing much needed social housing to its community.
With a strong short-term liquidity position, bolstered further by securing access to the Covid Corporate Financing Facility (“CCFF”) in May this year, Optivo’s treasury strategy has focussed on longer term funding, particularly given the current favourable market conditions.
Optivo have also undertaken extensive work on its credit positioning in recent months, alongside its newly revamped investor relations website and issuing its first ESG report and looked towards this transaction as a way to capitalise on the recent strong performance of Optivo’s credit spreads.
The transaction structure offered three key benefits to Optivo:
1) The 18-month deferral, at a credit spread inside of its secondary curve, provided a significant cost of carry saving versus an immediately drawn bond issue
2) Increasing the size of the 2043 bond to “benchmark” (£250m plus), the liquidity in the secondary market should improve as a result of it becoming eligible to index funds
3) Raising £150m of proceeds against a nominal value of £100m, the secured transaction offers Optivo security charging efficiencies
This excellent result demonstrates the strong positioning enjoyed by Optivo within the capital markets and reaffirms its long-term strategic plan is understood and supported by bondholders.