£400M sustainable bond issue for PA Housing

Key goals

• 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.

Our approach

• 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.

Results

• 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.