Yorkshire raises £750m in bond issue

The mutual, the UK’s second-biggest building society after Nationwide, raised the money from institutional investors yesterday in an oversubscribed covered sterling bond issue.

The bond issue, rated Aaa/Aa1 with ratings agencies Fitch and Moody’s, matures in seven years.

After marketing the bonds on Monday, YBS said the issue yesterday proved very popular with investors.

Within an hour the deal had exceeded the target size for the transaction, which YBS said allowed for “slightly tighter pricing”.

YBS achieved an order book totalling £1.25bn from more than 70 investors, and scaled it back to £750m.

It was the first time YBS has launched a covered sterling bond issue, after previously raising funds via Euro-denominated bond issues.

It last raised 600m euros through a bond issue in September.

“This is for general funding. For example, we intend to increase our mortgage lending by 30 per cent this year,” said a YBS spokeswoman.

“It’s not funding for mergers.

“It’s been a fantastic success. We had an order book far exceeding the amount we wanted to raise.”

Barclays, HSBC and UBS acted as lead mangers on the transaction.

“The sterling market has developed quickly in 2011 with covered bonds gaining popularity with UK investors and a number of issuers coming to this market as an alternative to continental Europe,” added the lender.

In February YBS unveiled a strong performance for 2010, turning a statutory operating loss of £12.5m in 2009 into a profit of £115.4m.

It made core operating profits, after mortgage provisions, of £128.5m compared to £7.7m in 2009.

New mortgage lending tripled from £936m to £2.8bn in 2010. It plans to increase this by another 30 per cent this year.

YBS recently said it is in advanced talks about merging with Norwich and Peterborough Building Society.