UK – Pension Insurance Corporation (PIC), the £8bn (€9.5bn) UK buyout provider, has backed a £70m social housing project near Manchester, acquiring all bonds issued by a Private Finance Initiative (PFI).

The social housing PFI, launched by Salford City Council, will see nearly 1,300 existing houses refurbished, with the £72m in financing also paying for maintenance over the next 30 years.

PIC noted that the bond was investment grade, enhanced through a subordinated bond placed by FHW Capital.

Its returns will match the provider's liabilities, but a statement did not disclose what kind of returns had been agreed on an annual basis.

Commenting on the deal, Mark Gull, co-head of asset-liability management, said: "As we continue to see an increasing flow of assets into our portfolio, growing significantly over the past 12 months, we are keen to continue sourcing long-dated, stable cashflows, which provide a decent return above risk-free yields. This transaction matches those criteria."

Allen Twyning, investment manager at PIC, said that social housing was just one of the areas of interest for him. "We think maybe some of the spreads that you receive there in terms of holding a bond directly from a housing association vs just holding a government bond, we think that gap is a bit tight at the moment. There seems to be a lot of interest in the sector from other people."

"There is still an area on the project finance side that we are happy to talk to," he said, noting PFI-style transactions such as the one with Salford.

However, he stressed that they were still hard to come by. "I think it's a common complaint across project finance that there isn't really this pipeline of deals that everyone would like to see."

The deal is not the first time PIC has invested in housing debt.

Last September, it acquired a £50m AA2-rated bond issued by housing association Raglan.

In related news, PIC has also completed a £30m buyout of the Auto Windscreens Pension Scheme, a 160-member strong legacy pension fund sponsored by the RAC.

Philip Gillett of Law Debenture and chairman of the trustees, said: "The team was flexible and innovative in helping us complete this transaction in a shortened timeframe, to allow us to conclude the transaction whilst markets remained favourable."