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Centrus advises Orbit on £450m Bond – Largest issued by a UK Housing Association

Transaction Overview

On Thursday 7th June 2018, Orbit issued a 30-year GBP450m bond, the largest ever single-tranche transaction by a UK housing association. The transaction is Orbit’s second issue in the public market following its debut £250m 2045 bond in 2015.

Orbit is one of the largest housing groups in the UK with c.40,000 units under management across the Midlands, East Anglia and South East areas. Orbit has a strong track record in development and delivered 2,030 new homes last year of which 1,210 were social and affordable homes. Ratings agency Moody’s recently confirmed Orbit’s high A2 (negative outlook) credit rating.

The bond issue which came at a spread to gilts of 160bps and a yield of 3.46% was the culmination of a process initiated by Orbit to re-shape its treasury book with the intention of providing the group with the financial platform required to underpin its growth ambitions. This involved a series of negotiations with its Tier 1 relationship banks to amend key gearing and on-lending covenants for the Group which will provide greater capacity to support its aim of delivering 20,000 new homes over the next 10 years.

Our Role

Centrus advised Orbit on the development of the strategy, banking negotiations, structuring of the bridging facility, execution of hedge breakage and the debt capital markets process. This demonstrates the holistic advice provided by Centrus across corporate finance, banking, derivatives and debt capital markets.

The four bookrunners on the transaction, Barclays, Lloyds, HSBC and Natwest Markets also provided a £300m syndicated bridging facility to allow repayment of legacy banking facilities and the breakage of related hedging.

“We set out to put in place stable, long-term funding to support our development programme and deliver much needed homes. The transaction went beyond a simple capital markets issue and involved refinancing existing debt, as well as arranging a bridge to the bond to ensure effective use of security. Centrus worked with us through every aspect of the process with the utmost professionalism, anticipating areas of risk, responding quickly and, most importantly, offering valuable advice in the decisions we had to make. It was a complex transaction, but we completed the deal successfully, meeting all our corporate finance and business objectives.”

Joy Baggaley, Finance Director – Orbit Group

For more information, please contact Phil Jenkins, Managing Director – Centrus

Centrus advises on innovative new pathfinder financing for Oaklee Housing

Transaction Overview

Pioneering limited recourse SPV finance allows Oaklee Housing access to a €50m loan facility for the provision of new social homes.

Centrus advised Oaklee Housing, one of the largest Approved Housing Bodies (AHBs) in Ireland, on the closure of a long-dated €50m debt financing agreement representing an important milestone in the provision of social housing today.

Centrus Solution

The loan structure provides Oaklee with access to committed, long-term fixed rate debt from a private funder utilising the existing Capital Advance Leasing Facility (“CALF”) and Payment and Availability (“P&A”) funding support structures available to AHBs from the Department of Housing, Planning and Local Government through local authorities.

The loan facility will be used to purchase 250 additional residential homes for social housing throughout Ireland. A deal has already been agreed with the Housing Agency for the acquisition of 148 vacant properties, with the majority located in Dublin.

Centrus supported Oaklee through the entire process providing advice on potential debt structures.  Centrus conducted engagements with a range of prospective funders, including domestic and international banks and institutional investors, on behalf of Oaklee before identifying NORD/LB, as the preferred funder.

“We are delighted to have advised Oaklee on this innovative financing package, which we hope will strongly assist in the development of future private financings in the AHB sector.  Ultimately the key objective has been to deliver homes to those who are most in need and we believe this financing will really make a difference.”

Jason Murphy, Managing Director – Centrus

“Our innovative SPV financing structure, designed with assistance from our advisors, Centrus, and the subsequent agreement with NORD/LB is putting more than €50million directly into the delivery of c. 250 social homes in the areas where they are needed most.  It is pleasing to see an international bank investing with confidence in large scale housing programmes and we hope others will follow. This is one of the most cost-effective long-term finance arrangements ever used in Ireland and means that we can make public money go further and deliver more. It represents good business for Oaklee and is a strong vote of confidence in our ability to deliver high quality homes for those in greatest need across Ireland in the years ahead.”

Sharon Cosgrove, CEO – Oaklee Housing

“Centrus used their extensive market knowledge to assist us in developing an innovative funding structure for this project. We found them to be proactive, supportive and excellent in finding solutions to complex issues. They have generated significant value for our organisation and I would not hesitate to recommend them.”

Michael Rafferty, Group Director of Finance & Resources – Oaklee Housing

For more information, please contact Jason.murphy@centrusadvisors.com

Centrus advises Alliance Trust on £60m Private Placement

Transaction Overview

Centrus is pleased to announce that Alliance Trust PLC – a FTSE 250 Investment Trust with gross assets as at end October 2018 of approximately £2.85bn – has successfully completed a long-term financing in the private placement market. Centrus advised on a £60m financing comprising three separate tranches of £20m each at maturities of 15, 25 and 35 years.

As a result of this financing, the long-term borrowing cost of Alliance Trust has been reduced from 4.3% to 3.7%. The proceeds of the private placement have been used to repay £60m of the company’s existing £127m of floating rate bank debt, such that the company’s current drawn borrowings will remain unchanged after this financing at an amount of £245.45m.

Alliance Trust is listed on the London Stock Exchange and headquartered in Dundee. Alliance Trust’s aim is to be a core holding for investors seeking increasing value over the long term. The equity portfolio’s target is to outperform the MSCI All Country World Index (ACWI) by 2% per year after costs over rolling three-year periods.

“We are delighted that Alliance Trust which is a very high quality borrower, attracted significant demand from a range of institutional investors enabling the company to price its most recent long-term financing at very competitive levels. This was achieved against a backdrop of considerable economic and political uncertainty and at a time of increased volatility and spread widening in the sterling public bond markets.”

Robert St John, Managing Director – Centrus

For more information, please contact Robertstjohn@centrusadvisors.com

Centrus advises Electricity North West on successful £68m index-linked swap restructuring

Transaction Overview

Electricity North West Limited (“ENW”), the owner and operator of the North West’s electricity distribution network, connecting more than 5 million people in the region to the National Grid, recently completed the restructuring of £68m of their long-dated index-linked swaps. The transaction was based on a bifurcation into on-balance sheet and institutional swaps, with the purpose of removing mandatory breaks scheduled for 2019.

Our Role

Centrus provided support and financial advice to ENW covering:

  1. The evaluation of potential swap solutions, including both on-balance sheet and bifurcated structures,
  2. Counterparty risk analysis under different scenarios including within the context of the existing portfolio
  3. Support with the institutional solution investor approach
  4. Management of swap execution strategy
  5. Assistance with the detailed documentation required throughout the transaction

“This is the third time that Centrus has supported the Electricity North West group in successfully implementing a bifurcated derivative structure which demonstrates our capability in specialist capital market and derivative advisory and also shows the continued accessibility of the investor pool in this limited market.”

Geoff Knight, Managing Director – Centrus

For more information, please contact geoff.knight@centrusadvisors.com

Centrus advises Corelink on the leasing of rolling stock to West Midlands franchise

Overview

Corelink Rail Infrastructure Limited, a rolling stock lessor established by a joint venture of funds managed by Deutsche Asset Management and Infracapital, has agreed to purchase £681m of rolling stock for use on the West Midlands rail franchise in England.

The rolling stock order comprises two new electric multiple unit fleets to be built by Bombardier and one new diesel multiple unit fleet built by CAF. The units are scheduled to start entering service from 2020 onwards.

Our Role

Centrus acted as commercial adviser to Corelink Rail during the bid process providing the following services

  • Advising Corelink Rail on the background to the UK rail franchise system together with the corresponding Government regulatory framework
  • Support with the raising of funds in the short term commercial debt and long-term PP markets
  • The evaluation of potential interest rate and currency hedging solutions for the underlying financing
  • Assistance with the negotiation and closing of the transaction documents

Centrus is also acting as interim lease manager of the fleets.

For more information, please contact london@centrusadvisors.com

Centrus advises Northern on successful lease financing of two new fleets of trains

Overview

Arriva Rail North Limited, became the new rail operator for Northern on 1 April 2016, marking the start of a nine-year franchise that will transform travel through a £1 billion investment in the largest rail network outside London.

Our Role

Centrus acted as financial adviser to Arriva Trains on a contract for new diesel multiple units and electric multiple units for the new Northern Rail franchise.  Centrus ran the competitive tender for the financing of the new rolling stock and then advised Arriva throughout the negotiation and closing of the transaction documents.

The order comprises 31 three-car and 12 four-car electric multiple-units, and 25 two-car and 30 three-car diesel multiple-units manufactured by CAF is valued at around £490m. The 160 km/h units will be part of CAF’s Civity family, and all are scheduled to enter service by December 2018.

For more information, please contact Stephen Layburn, Managing Director – Centrus

Centrus advises Greene King on £750m bank facility, Spirit debenture refinancing and swap breaks

Transaction Overview

Greene King is one of the UK’s leading pub retailers and brewers, with over 3,000 pubs countrywide and two breweries in Bury St Edmunds and Dunbar.

On 27 November, Greene King PLC amended its existing £400 million revolving credit facility to incorporate a new £350 million revolving 3 year facility taking the total facilities to £750 million. The new facility is available to fund the acquisition of pubs from the Spirit debenture which improves the ability of the company to refinance Spirit debenture bonds and related swaps.

Centrus Solution

Centrus acted as corporate finance and structuring advisor to Greene King on the bank facility, Spirit bond repayment and breaking of associated interest rate swaps.

The new bank facility will be partially drawn down to fund the purchase of 104 pubs from the Spirit debenture, the financing vehicle for Spirit Pub Company which was acquired by Greene King in 2015. Spirit will then apply the disposal proceeds and existing cash balances to the prepayment of A1, A6 and A7 bonds and related financial obligations, which will eliminate a cash sweep and 1.5% margin step-up that were due to commence from September 2018.

Related to this transaction the company will also make a one-off payment of £40-50 million to terminate the long-dated interest rate swaps hedging the prepaid Spirit bonds. The cash interest savings of refinancing the prepaid bonds via bank facility is approximately £2.5 million per quarter.

Centrus previously advised Greene King on the consent solicitation process to remove the Ambac wrapper from Spirit debenture in August 2017.

“The Centrus team supported us throughout the process, from initial strategy development through to execution of the bondholder consent solicitation, bank facilities and debenture bond refinancings. They became a seamless part of our delivery team, consistently providing expert independent advice and strong execution support.”

Eileen Tindall, Head of Treasury & Tax – Greene King PLC

Centrus advises NorteGas on €1.3bn refinancing

Overview

NorteGas Energía Distribución (“NorteGas”) successfully launched and priced their inaugural €1.3bn dual-tranche bond transaction on 21st September 2017, with a €550m 5 year priced at mid-swaps+68bps and a €750m 10-year priced at mid-swaps+118bps. The transaction was more than four times oversubscribed and is the largest debut bond from a Spanish issuer since 1999. The bonds are expected to be rated BBB- by Standard & Poor’s.

In July this year a consortium of investors comprising, amongst others, institutional investors advised by J.P. Morgan Asset Management, Swiss Life Asset Managers and a GCC sovereign wealth fund completed the purchase of NorteGas from Energias de Portugal, S.A. (“EDP”).

Centrus initially acted as debt and hedging advisor to the consortium on the bank debt used to support the acquisition and in implementing a hedging programme to support the planned long-term refinancing of the business under new ownership. Centrus was then retained to advise on the bond refinancing and associated unwinding of hedging positions.

NorteGas is the second largest gas distribution company in Spain, comprising over 1 million supply points of natural gas and liquefied propane gas, located in the regions of the Basque Country, Cantabria and Asturias.

For more information, please contact Geoff Knight, Managing Director – Centrus

Centrus advises Housing & Care 21 on successful sterling bond debut

Transaction Overview

Centrus client Housing & Care 21 has issued its debut sterling bond issue, successfully pricing a £250m issuance with a 2049 maturity at Gilts +138 and an all-in coupon of 3.288%. Natwest Markets and Barclays acted as bookrunners. The order book 2.45x over-subscribed, signaling healthy investor demand in the housing sector following recent issuances by Catalyst (also advised by Centrus), WM Housing and Notting Hill Housing.

“Housing & Care 21 is a longstanding client of Centrus and we are very pleased to have supported them on this important transaction. We would like to congratulate the team for delivering an outstanding result for the company.”

Phil Jenkins, Managing Director – Centrus