Lending structures

M&G’s Social Housing team is a master of many lending structures, with a long and successful track record of providing the right approach for each situation. Below you will find a brief introduction to each, with links to deal case study examples.

Bond transactions

Public bonds

– M&G buys housing association "own name" listed bonds
– Normally for larger amounts - M&G has the ability to place large orders
– Long-term debt, typically 25 to 30 years
– Fixed interest rate
– Amortising or bullet repayment

Private placements

– Syndicated private transactions, typically structured by a bank and offered to institutional investors
– Normally for amounts of £40m or more, M&G has the ability to place large orders
– Long-term debt, typically 20 to 35 years
– Fixed interest rate
– No requirement for an external credit rating

Bi-lateral private placements

– Private debt arrangement negotiated directly between M&G and the housing association
– Minimum amount from just £10m
– Long-term debt, typically 25 to 40 years
– Fixed or inflation-linked interest rate (or a combination of both) with transparent pricing
– Amortising repayment (with or without a capital holiday) or bullet repayment
– Competitive asset and interest cover covenants (no gearing covenant requirement)
– No requirement for an external credit rating
– Flexible drawdown (issuance) if required
– M&G uses proven, familiar documentation

Club deals

– Housing associations seeking to borrow smaller amounts (less than £10m) of long-term money on reasonable terms often find their choices extremely limited
– M&G is able to offer bi-lateral private placements (see above) where three or more housing associations "club" together to raise a critical mass of funds in excess of £20m

Shelf facilities

– Designed for housing associations seeking a "standby" bi-lateral private placement (see above)
– Documentation is executed, but with no obligation to issue
– M&G will quote a price if the facility is required, which the housing association can accept, or not.

Leaseback transactions

Sale and leaseback

– The housing association sells properties to a fund managed by M&G, which then leases them back to the housing association for a specified period (typically 25 to 45 years)
– The M&G fund retains ownership of the properties when the lease expires

Lease and leaseback

– The housing association sells properties on a long lease to a fund managed by M&G, which then leases them back to the housing association on a shorter lease
– The housing association can buy back the properties for a nominal sum (usually £1) when the lease expires