Pension Insurance Corporation finances its second housing PFI project

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Pension Insurance Corporation finances its second housing PFI project

Pension Insurance Corporation (PIC), a specialist provider of insurance solutions for defined benefit pension funds, has provided £74 million of funding as the key investor for a PFI bond which allows Manchester City Council to begin regenerating more than 1100 homes in the Brunswick area of the city. The bond has been guaranteed by Assured Guaranty (Europe) Ltd. Lloyds Bank was the bond arranger.

The 25-year regeneration programme will transform the Brunswick area of East Manchester, providing 522 new homes as well as new community facilities, including an Extra Care centre and retail units. The project will deliver construction and refurbishment of social homes, new parks and green spaces and play areas, as well as allowing the construction of 322 new homes for private sale.

Equitix Housing 2 Ltd. (77.5%), Contour Homes Ltd. (15%) and Galliford Try Investments Ltd. (7.5%) form the joint venture in charge of the project.

The publicly listed bond priced on 17 December 2013 at 4.926%, equivalent to a spread of 190 basis points over Gilts. The bonds were rated AA- (stable) and A2 (stable), with underlying project ratings of BBB-and Baa3, from S&P and Moody's, respectively. Financial close took place on Friday 20th December 2013.

Ashurst has advised Assured Guaranty, as monoline wrapper, and Lloyds, as bond lead manager.

In September 2013, PIC announced that it was the sole investor in £72 million of bonds backed by a project agreement with Salford City Council, to fund the New Pendleton Social Housing PFI project.

The c.£150 million invested in Social Housing PFI bonds in Greater Manchester, is part of a wider infrastructure investment strategy by PIC which has seen almost £2 billion invested in the asset class in the past year. PIC's investment strategy focusses on long-term, secure debt investments to match long-dated liabilities in a growing portfolio.

 Allen Twyning, Investment Manager at Pension Insurance Corporation, said:

"Having underwritten this deal and invested £74 million, we are very pleased to have completed a second PFI bond in Greater Manchester in recent months. With more than £3 billion of pension scheme liabilities insured in the past year, PIC has seen strong inflows which we are seeking to invest in assets with long-dated, stable cash-flows."

Nick Proud, Chief Executive Officer of Assured Guaranty (Europe) Ltd., commented:

"This is the third infrastructure bond that Assured Guaranty will have guaranteed in 2013, and it is continued evidence that Assured Guaranty's bond wrap provides a cost-effective alternative to other sources of debt funding for infrastructure projects - not only for the City Council but also for the infrastructure consortium and the taxpayer, while providing enhanced security for bondholders. We are ready to work directly with other City Councils and awarding authorities, up and down the UK, to guarantee a significant quantum of infrastructure debt."

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