Frequently Asked Questions
DFinitive Capital is a debt capital markets (DCM) business specialising in the origination, structuring and delivery of diversified wholesale funding solutions.
It was established to provide an alternative, durable, streamlined and cost-efficient debt funding model for the Irish Approved Housing Bodies (AHBs) to supplement and complement existing funding streams from the banking sector or state-owned companies.
DFinitive Capital provides funding solutions for AHBs allowing them to grow and diversify their funding for the delivery of social and affordable housing.
The DFinitive Capital team has significant experience in, knowledge of and contacts across the DCM, gained from working in different roles across a diversity of financial institutions, as active participants in the markets.
The breadth and depth of the team’s expertise, encompassing treasury, lending, bond issuance, bond investment, structured finance and debt investor relations, equips it with unique perspective; a real understanding of the markets from a borrower’s and equally from an investor’s point of view.
DFinitive Capital is bringing alternative and much needed debt funding solutions to the AHBs in Ireland, initially sourcing long-term fixed rate finance from institutional debt investors already familiar with and invested in social and affordable housing in other jurisdictions.
DFinitive Capital’s initial clients are those AHBs, who are members of The Housing Alliance, but it is also working on funding solutions for other AHBs.
Yes. DFinitive Capital is focusing on AHBs initially. That said, the model can be applied for debt funding for other social infrastructure requirements.
The DCM represents a very large, deep and liquid funding market, reckoned to be up to $140 trillion in size globally. It is estimated that the UK social and affordable housing sector has in excess of £50 billion funding drawn from the DCM. Housing for All recognised in 2021 that international debt capital markets will play a key role in funding.
DFinitive Capital’s funding model is the key that actually opens the door for AHBs to established and responsible providers of long-term debt finance. It offers a complementary financing alternative to bank loan financing and represents a real opportunity for AHBs to diversify their funding sources and investor base.
The DCM represents a market that is diverse, liquid and scalable. It provides flexibility to accommodate different structures, tenors and mixed tenure housing projects.
DCM is the key market for governments, companies and financial institutions seeking to raise debt funding, and on the other hand for institutions seeking investment opportunities that offer diversity as to asset class/sector, return, liquidity and credit quality.
DCM can also be referred to as fixed-income markets as investors earn a stable, or fixed rate of return (an interest rate) on their investments.
Entities seeking to raise debt finance through the DCM issue bonds or promissory notes to institutional investors, either as public issues which can be traded, or as private issues which tend to be held to maturity by the investor.
Listed bonds are issued by an Aggregator vehicle, Doras Funding DAC (DORAS) to institutional investors and the funding so raised is then on lent by DORAS to AHBs on a matched basis, as regards tenor, repayment and interest rate; a pass-through structure with asset and liability matching.
An Aggregator vehicle is an entity which allows for the aggregation of loans to individual AHBs and / or for the pooling of loans to a sufficient scale to access the debt markets through bond issuance. It is an established and recognised structure across the DCM.
DFinitive Capital’s DCM model represents an efficient and repeatable debt fund-raising platform. The Aggregator will drive efficiency in procuring financing and best practice through generic and consistent bond issuance and lending, standardised documentation and uniform processes. The benefits include its, scalability and adaptability to changes in future policy priorities. It allows for a focus and consistency in approach from the different service providers, the spreading of fixed costs over a series of transactions, and a matching of assets and liabilities. Importantly as the platform grows, it conveys coherent, ongoing and uniform investor relations messaging to the DCM investment community.
A bond is a fixed income instrument under which an institutional investor provides funding to a borrower (the bond issuer).
A bond can be listed on a recognised stock exchange. This is normally done, in line with capital markets requirements, to allow for the payment of bond interest coupons to institutional investors without deduction of withholding tax. A listing also supports the liquidity or transferability of bonds between institutional investors.
DORAS is a special purpose vehicle established under Section 110 of the Taxes Consolidation Act 1997 (a Section 110 company), a structure well known and recognised in the international DCM.
DORAS is ownership remote from DFinitive Capital with corporate services being provided by Waystone Management Company (the leading provider of institutional governance, administration, risk and compliance services), https://www.waystone.com
DFinitive Capital, under a service level agreement with DORAS, acts as the Programme Manager to structure, co-ordinate and manage all activities under the DCM funding model.
Section 110 companies are routinely established in Ireland for the purpose of facilitating a number of transaction types with different commercial, regulatory or investment objectives. While Section 110 companies cannot directly hold property assets such as land and buildings, they can hold loans and other financial assets that derive their value from Irish land and buildings, such as mortgages on Irish houses (Department of Finance website – The role of the Section 110 regime), https://consult.finance.gov.ie/ga/consultation/funds-sector-2030-framework-open-resilient-developing-markets/chapter/7-role-section-110-regime
Section 110 companies are obliged to report quarterly data to the Central Bank of Ireland under S.18 of the Central Bank Act 1971 (Central Bank website – Special Purpose Vehicles), https://www.centralbank.ie/statistics/statistical-reporting-requirements/special-purpose-vehicles
DFinitive Capital, drawing on its capital markets expertise and contacts, is the initiator and sponsor of this project to bring DCM originated funding to AHBs. All capital markets transactions require structuring and the expert input and services of third parties, to ensure that transactions are documented correctly, operate as intended and comply with legal and reporting obligations.
DFinitive Capital as the appointed Programme Manager is responsible for structuring the platform, for originating and underwriting loans and for monitoring all aspects of loan facilities and the matching bond transactions.
Additionally, the Programme Manager is responsible for identifying, engaging with and reviewing the performance levels of all service providers including lawyers, account banks, ratings agency and bond/security trustees.
These include insurance companies, pension funds and asset managers, entities that are recognised as providers of ‘patient capital’ (long-term fixed rate debt finance). Such entities are already familiar with and invested in social and affordable housing in other jurisdictions, as the asset class provides stable rates of return and predictable cash flow profiles to match those institutions’ long-term liability positions.
DFinitive Capital’s DCM model represents an efficient and repeatable fund-raising platform that can sit beside existing AHB funding arrangements. It provides entry into a large mature sophisticated debt market with a greater focus on underlying cash flows rather than asset values. This market is capable of delivering longer tenors, financial covenant flexibility, and solutions for mixed tenure (social housing and affordable cost rental) housing projects.
Funding originated through the issuance of long-term bonds issued via an Aggregator such as DORAS is immediately executable for AHB borrowers seeking long-term certainty, transparency, stability across market cycles and access to a whole new spectrum of lenders.
DFinitive Capital’s DCM model is not subject to the regulatory capital requirements imposed on banks under the likes of the Basel III and Basel IV measures.
Funding facilities from banks or corporate broker sponsored vehicles rely on their available balance sheet capacities and internal structuring goals and are executed across different regulatory frameworks and fee schedules.
DFinitive Capital’s DCM model provides AHB borrowers with immediate access to institutional investors through capital markets issuance.
DFinitive Capital has extensive relationships with institutional investors already familiar with and invested in social and affordable housing as an asset class in other jurisdictions.
Due to this extensive marketing to investors and competitive investor engagement, AHB borrowers can benefit from real-time market pricing, increased transparency, and potentially more favourable terms.
Bond issuance by DORAS to institutional investors directly funds the loans from DORAS to AHBs, ensuring strong alignment between borrower obligations and investor expectations. Funding (bond issuance) and lending terms are matched upfront, ensuring that AHB borrowers receive committed funding from engaged investors.
This structure promotes disciplined pricing and investor diligence, minimising interest rate risk and ensuring long-term stability whilst delivering real funding diversification for AHBs.
A ratings agency is an entity that assesses the financial strength of various borrowers including governments, companies and financial institutions, focusing on their ability to meet principal and interest payments on their debts. The rating assigned to a given entity shows the agency’s level of confidence that the borrower will honour its debt obligations as scheduled.
Ratings are a feature of capital markets activity. Many institutional investors require that a bond, or the issuer of a bond, or the recipient of the pass-through funding (the AHB borrower) is rated by a recognised ratings agency. Others will conduct their own internal ratings analysis. In the case of loans from DORAS, ratings, where required, will initially be on a private basis (not publicly disclosed).
Initially DFinitive Capital’s DCM model is directed towards the provision of debt funding for social and affordable housing. DFinitive Capital believes that it can also address the funding requirements for other infrastructural and social projects across the health and educational sectors in time.
The minimum size for DCM issuance by way of a private placement would normally be of the order of €30m, although certain institutional investors might consider a lower figure in the expectation of further follow on transactions.
DFinitive Capital as part of its remit as Programme Manager to DORAS, is charged, inter alia, with the origination of lending opportunities, and the underwriting, assessment and analysis of each project behind a loan request. This entails a detailed review of the relevant project information, a critical assessment and scenario testing on the associated cashflows and a close interaction with the ratings agency and bond investor to deal with any queries they raise, before a credit paper is submitted to credit committee for formal decision. During the assessment of a project, an indicative term sheet is made available to the AHB borrower.
Interest rates on loans from DORAS will be set by reference to the aggregate of a Margin plus the relevant EURO mid-market swap rate for the period commencing on the availability of funds and ending on the maturity date. The Margin will be set by reference to the circumstances of each proposal and institutional investor appetite.
Tenors of individual loans can be up to thirty years in the case of social housing and mixed tenure projects and up to forty years for affordable housing projects.
Loans are normally structured to provide for amortisation in equal six-monthly instalments over term.
A loan facility from DORAS backed by bond issuance, should take between 12 and 16 weeks to complete based on the ready availability of information, full co-operation between all parties, efficient AHB turnaround on lender and investor (and ratings agency if relevant) queries and timely execution of facility documentation.
DFinitive Capital has an ongoing active dialogue with AHBs and institutional investors. It welcomes the opportunity to engage with AHB management teams, boards or board committees to discuss the benefits and opportunities DCM funding solutions offer and / or to consider specific project funding requests.
Get in touch with us:
or any member of the DFinitive Capital team using:
firstname.secondname@dfinitive.capital
Tel: +353 1 631 0207
14 Merrion Square North, Dublin 2, D02 NW28.