One of the North East’s largest housing providers, Karbon Homes, has issued a further £100m of bonds to support the delivery of its ambitious ‘Strong Foundations Strategy’ and directly benefit the regional economy.
The strategy outlines three key aims of ‘providing as many good quality homes as possible’, ‘delivering excellent customer service’ and ‘shaping strong sustainable places’.
As well as promising to deliver over 500 new homes every year, Karbon is also committed to investing £193m in its existing homes across the North East and Yorkshire over the next four years, to ensure they are fit for the future.
One key programme will see Karbon invest in its strategy to improve the energy efficiency ratings of its homes to meet the Government’s aspiration for EPC C rating by 2030.
2019/20 was a successful year for Karbon with the completion of 534 new homes across the region, a 24% increase on the 430 completions in 2018/19.
The foundations to deliver this strategy were firmly laid in November 2018 when Karbon first entered the bond market, issuing £150m, with £100m retained for future release. Since then, the Regulator of Social Housing has re-affirmed its G1/V1 rating, the highest possible score for governance and viability, and Karbon has also maintained a strong investment grade credit rating A (stable) from Standard & Poor’s.
The bond was priced at an attractive all-in rate of less than 2%, with an over-subscribed order book.
The transaction was well received by existing investors of Karbon; impressed with the strength of the Karbon story from its deep roots within the local communities of the North East of England, to the position it now occupies following a number of successfully managed mergers in recent years.
There were also a number of new investors in the Group, who in addition to the above, were attracted by the strength of Karbon’s brand, its leadership, strategy and approach to risk management.
Paul Fiddaman, Chief Executive of Karbon Homes said: “As a profit for purpose business, we invest any surplus into building, improving and maintaining homes, and providing sustainable outcomes for customers and places. Combining a sound business head, with a strong social heart, the issuance of our retained bonds ensures we continue to have the financial strength to deliver our ambitious strategy and build strong foundations for even more people.”
Kirsty Garrett, Director, DCM at Lloyds Bank, who managed the retained bond sales process on behalf of Karbon Homes added: “Lloyds was delighted to support the Karbon team in successfully selling their £100m of retained bonds. After such positive investor interest for their inaugural £250m issue in November 2018, investors welcomed Karbon’s return to the bond market and were very engaged throughout the marketing process. Karbon’s credit profile, regional presence and experienced management team supported strong investor demand, enabling Karbon to price the £100m retained sale at a yield of 1.941%, resulting in over £130m in proceeds.”
Karbon was also supported by Chatham Financial Europe Ltd (treasury advice), Trowers & Hamlins LLP (legal advice) and Eversheds Sutherland (property legal advice). Funders’ legal advice was provided by Addleshaw Goddard LLP, with Savills LLP providing property valuation services.