How to issue a bond: nine tips for housing associations

Make time

This path is so well trodden it is difficult to see over the sides of the trench. The legal documentation has developed over many years so there is virtually no opportunity to change it. In addition, investors need to know heir investment is secure and so satisfactory title must be demonstrated. Depending on the type of organisation and the quality of your records, this can be inordinately difficult. There is no shortcut, so start early.

Do your homework

The financial world is just that, a different world. Investors will know more about you than you do about them. Most are knowledgeable about housing associations and what they do not know, their in-house analysts will discover. Any credit rating (and Moody’s dominates the market) will be used to verify their analysis and may give comfort that their understanding is correct. And comfort gives confidence. Confidence can lead to a lower rate of interest – but don’t bank on it.

Learn the language

Coupons aren’t supermarket money-off vouchers, a talon is not an eagle’s claw, A2 is not a dual carriageway, bps is not your internet speed, a custody agreement is not signed at your local police station. Do not be afraid to ask questions to understand the language quickly. It’s a steep learning curve but one you must climb. You cannot make the right decisions if you are lost in translation.

Get the best advice, get it early

The number of good financial and legal advisors is not large. Make sure the board choose who they can work with; this relationship is crucial. Listen to advice but challenge rigorously. Along the route there are numerous other organisations charging enormous fees – it is guaranteed to make your eyes water.

Be open and transparent

Have a spring clean before you even consider this route. Don’t just get the skeletons out, throw out the wardrobes too. If not, they will haunt you just when you think you are committed. Get your website up to date and accessible with key, relevant information. Deal with problems, or at least have detailed and costed plans you can share.

Stick to the knitting

Clarity helps. Complex group structures, multiple tenures, exposure to market sales all build additional risk into the business. By all means carry out these activities but do not over complicate the decision. Make it clear where responsibility lies and how it could impact on the principal business: social housing.

Crunch your numbers mercilessly

Most investors are knowledgeable about housing associations. But numbers tell a powerful story. Identify the key risks to your business, do sensitivity analysis and quantify the different outcomes. Use that analysis to evidence your understanding and give confidence on your control. How many tenants are affected by the bedroom tax, how many families will be affected by a £24,000 benefit cap? And £23,000? When you are asked something you don’t know, don’t panic but have people back at the ranch who can get it for you quickly.

Be confident and authentic

Although they invest in the properties, investors want to know that the organisation is well managed. The best way to get that information is to meet you. You care about what you do and live it 365 days a year so, nothing fancy, a combination of enthusiasm and knowledge can be infectious.

Help the board

This is a difficult area. The field of capital funding is specialist and board members are highly unlikely to have been exposed to it before. Get board members involved early because the stacks of documents the board will be asked to approve are in legalese. If the contents are not understood, cracks will show either during the process – or worse – years later when the funding is in place. Be an effective bridge between the board and the specialist advisers. The board must be in control and constantly ask the million dollar question: have we protected the social housing assets?

First published in The Guardian, 17th December 2014

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