European investors boost record low rate on HA’s £350m sustainable bond

News17 Jan 2020Sarah Williams

Clarion Housing Group has raised £350m through its first sustainable bond with the lowest coupon for a primary bond issue by a housing association, following interest that included “significant demand” from investors in Europe.

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The secured issue, which priced at an all-in effective rate of 1.88 per cent on 15 January, made use of the association’s new pan-European ‘Certified Sustainable Housing Label’.

Clarion became the first UK housing association to receive the accreditation, alongside a French and a German housing provider, in November.

This week’s 15-year bond issue attracted £1.3bn of orders from investors that included “significant demand from European investors”, the housing association said.

The final margin was 98bps over gilts, with a coupon of 1.875 per cent.

The bond was issued through the provider’s £3bn Euro-Medium-Term-Note (EMTN) programme, to which the label now applies, with Clarion Funding as the issuer and Clarion Treasury the group borrower.

The proceeds will be used exclusively for the development of new-build, energy-efficient, affordable homes.

Gareth Francis, Clarion’s director of treasury and corporate finance, said being able to issue quickly through the EMTN framework helped to achieve the result. But he added that the provider’s environmental, social and governance credentials had a “very significant part to play, particularly in garnering wide interest”.

He said: “This reinforces our belief that a positive sustainability story would attract new funding sources. We hope that this issue builds momentum for the sector, increasing cost-effective investment in HAs – and pushing the sustainability agenda further forward.”

In an interview with Social Housing last year, Mr Francis said that while it was not possible to say whether the label could have a pricing advantage, there could over time be a “disbenefit to not doing this”. He added: "[So it’s a question of how long this is a USP for us as to how much of a benefit we will see. Certainly it will provide an obvious route to market for impact funds and it should broaden the pools of capital that can and want to invest in us.”

Commenting on the bond issue, chief financial officer Mark Hattersley said: “We are delighted by the record-breaking performance of this bond, which is a vote of confidence in the strategic direction of Clarion Housing Group.

“This backing in the market will underpin our plans to scale up delivery of new homes.”

Barclays, Lloyds and NatWest Markets were joint book-runners and arrangers on the issuance.

Clarion’s legal advisor was Allen & Overy, with funders’ valuation from JLL and Savills and legal advice from Clifford Chance. Prudential Trustee Company is the security trustee.

Update: at 12:08 on 17/01/2020 this story was updated to include details of the margin, coupon and advisors on the deal.