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.

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.

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

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