£400M sustainable bond issue for PA Housing
- May 7, 2021
A case study of how Chatham advised PA Housing on its first sustainable bond issue, developing a sustainable finance framework and targeting ESG investors.
- PA Housing owns and manages over 23,000 homes across the Midlands, London, and the South East.
- PA Housing last approached the capital markets in 2015, issuing its inaugural £250M 2047 3.625% bond.
- PA Housing has an objective to build an average of 600 homes per year to 2030, doubling from its current levels.
- To support its development programme and sustainable investment in existing homes, PA Housing was seeking further long-term funding from the capital markets.
- Chatham was appointed to advise PA Housing; an element of the mandate was to reset the trading performance on its capital market debt to reflect the quality of its credit.
- Chatham assisted PA Housing in developing a sustainable finance framework and supported PA housing on attaining a second party opinion (SPO) from Sustainalytics.
- Chatham made recommendations to PA Housing on the selection of joint lead managers, particularly focusing on those with strong credentials in ESG-linked issuance and a commitment to repricing its credit spread.
- Chatham advised on the structure of the issue, including timing of the launch and the choice of an intermediate maturity to optimise pricing among ESG-focused investors.
- The £400M 15-year sustainable bond, of which £100M is retained, was priced at a spread of 87 bps over gilts, to give an all-in cost of debt of 2.0%.
- This represented a 23 bps improvement from the opening initial price talk (IPT) and a discount of 22 bps to the secondary market bid spread on the existing 2047 bond on the day of issue.
- Following the management presentation, the spread had already improved by 15 bps, resulting in final pricing which was 37 bps inside the initial spread on the existing bond.
- The bond issue attracted outstanding investor demand. The orderbook was more than three times oversubscribed, with over 60% of orders from offshore investors.
Simon Hatchman, Executive Director - Resources, PA Housing
This was an extremely successful transaction for PA. Chatham provided strong support throughout the planning and execution phases, giving valuable strategic insight into target pricing and measures to positively influence investor appetite. Chatham was also closely involved in the design of our Sustainable Finance Framework, a key component of the transaction which enabled us to share our ESG credentials with the investor community.
This material has been created by Chatham Financial Europe, Ltd. and is intended for a non-U.S. audience. Chatham Financial Europe, Ltd. is authorised and regulated by the Financial Conduct Authority of the United Kingdom with reference number 197251.
Our featured insights
U.S. real estate and capital markets update Q3 2021
As we wind down on summer 2021, many Americans are returning to the office and sending their children back to school. We recently reviewed the effects of COVID-19 on the U.S. economy and takeaways for the real estate market during our semiannual market update webinar. On September 15,...
European real estate and capital markets update Q3 2021
It’s back-to-school month for most children, and back to the office for an increasing number of workers too. What better time to host our semiannual market update webinar for real estate? On 15 September, participants listened to our experts, Adrian Ng and Jamie Macdonald, provide an overview of...
Debt Valuation Market Update Q3 2021
In this webinar Jaran and Karina will highlight the key drivers of debt valuation for the third quarter 2021. They will also cover lending markets and the mark-to-market impact.
Recapping Powell's Jackson Hole 2021 speech
Jerome Powell’s speech at the 2021 Jackson Hole symposium brings the market one step closer to a taper of quantitative easing. Shortly after the COVID-19 pandemic hit the U.S. in early 2020, the Federal Reserve slashed short-term rates to zero and began purchasing assets at a rate of $120 billion...
Semiannual Market Update for Real Estate
As we near the end of 2021, real estate investors continue to face significant uncertainties. Will COVID-19 variants lead companies to delay or modify return-to-office plans? What if inflationary pressures persist — will the Federal Reserve's hand be forced to raise rates sooner? How do the...
LIBOR transition update — Q2 2021 review
Chatham’s update on the LIBOR transition, summarizing recent news, transaction activity, and upcoming deadlines to help you stay current as the market transitions away from LIBOR.
Freddie Mac asks borrowers to extend protection on LIBOR-indexed ARMs through June 2023
U.S. bank regulators are asking banks to discontinue offering LIBOR-indexed loans and hedges (including caps and swaps) by the end of 2021. Borrowers may no longer be able to purchase/extend LIBOR caps they otherwise would have to extend beyond 2021. Freddie Mac is asking its Optigo lenders to...