PA Housing has issued a £400m bond using its new sustainable funding approach, supported by Lloyds Bank and Barclays.
The funds will be used to help deliver the 23,000-home housing association’s business plan, including investment in sustainability measures for existing homes and building 6,000 new homes by 2030.
The bond was almost five times oversubscribed, priced at 87bps over gilts (the cost of government borrowing), and had an all-in coupon of 2.00%.
£100m of the bond is retained for future use.
The Sustainable Finance Framework (SFF) has been developed to allow PA Housing to work with investors keen to find opportunities that meet their ESG (Environmental, Social and Governance) requirements.
The SFF aligns with the United Nations’ Sustainable Development Goals and will allow investors to demonstrate their funds are being used to deliver key aims such as more energy-efficient, social homes.
Simon Hatchman, executive director of Resources, at PA Housing, said: “This is a really important day for PA Housing.
“As a not-for-profit social housing provider, we have the potential to make a profoundly positive impact on people’s lives, and we intend to do all we can to make this a reality.
“By raising funds through our new Sustainable Finance Framework, we are ensuring we use our strong balance sheet to secure competitive funding from a range of investors.
“This allows us to invest more in improving our existing homes to make them cheaper to live in and build 6,000 more social homes to high energy-efficiency standards by 2030.
“The funding will also enable us to invest in wider estates infrastructure, including electric-vehicle charging points, recycling facilities, and improvements to public space.”
Hatchman added: “We are very pleased with the outcome of this transaction. We greatly value the support given by our bookrunners and advisors, and from the investor community, to enable a successful completion.
“As a proud BAME housing association, it has been encouraging to see the extent to which our BAME background resonated with investors keen to see broader representation in leadership and board membership. This influenced our decisions on the allocation process.”
Kirsty Garrett, director of Lloyds Bank’s Debt Capital Markets team, said: “The Lloyds Bank team successfully worked with PA Housing to issue its inaugural sustainability bond, aligned to its recently published Sustainable Finance Framework.
“ESG is at the core of PA Housing, renowned for its longstanding heritage in supporting BAME residents and colleagues.
“This was clearly presented during the investor roadshow and, alongside a robust credit story, led to significant demand for the bond, with the orderbook peaking at over £1.2bn.
“The transaction marks a strong return to the capital markets for PA Housing and positions the organisation well for a future sale of its retained bonds.”
Matt Thomas, head of UK Corporate DCM at Barclays, said: “Barclays is proud to have supported PA Housing on an incredibly successful return to the capital markets and support its plans to invest in both existing homes and deliver new affordable homes in line with its 2030 plan.
“Investors fully embraced PA Housing’s sustainable finance strategy and recognised and rewarded the leadership shown.
“The investor engagement throughout the roadshow and execution phase is a testament to the quality of the PA Housing management team and strength of the PA Housing credit.
“The transaction delivers not only a strong initial pricing and demand outcome, but also ensures PA Housing has established a sustainable issuance platform for the future.”
Julian Barker, head of Banking and Capital Markets at Devonshires, said: “We are delighted to have worked with the team at PA Housing on this deal.
“The excellent pricing and level of investor demand show both the strength of PA Housing as a business and also the continued appetite for investment in the social housing sector in general.”
- Amount issued: £400m, with £100m of this retained
- Coupon: 2.00%
- Cost over gilts: 87 bps
- Bookrunners and ESG structuring advisors: Barclays and Lloyds
- Treasury adviser: Chatham Financial
- Legal advice: Devonshires and Addleshaw Goddard
- Second-party opinion on ESG: Sustainalytics
Main image: Simon Hatchman, executive director of Resources, PA Housing
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