THFC launches new sustainable finance vehicle and £2bn EMTN

News27 Mar 2023Michael Lloyd

Bond aggregator The Housing Finance Corporation (THFC) has unveiled a new £2bn finance vehicle to issue sustainable-labelled funding for housing associations.

Picture: Getty

Sharelines

The Housing Finance Corporation has unveiled a £2bn finance vehicle to issue funding for housing associations to deliver sustainable new homes and retrofit existing homes #UKhousing #SocialHousingFinance

THFC Sustainable Finance (TSF), a new subsidiary of THFC, will access the markets through a euro medium-term note programme and will focus on issuing sustainable use of proceeds and sustainability bonds.

Borrowers will be able to use funding to invest in new and existing homes, including retrofitting homes.

THFC said borrowers would be offered the “the same competitive terms” as through the company’s £1.47bn subsidiary, Blend. It said this would provide associations with access to the capital markets in smaller amounts and via deferred drawdowns.

TSF has been assigned ‘A’ long-term and ‘A-1’ short-term ratings with stable outlook by S&P, which the aggregator said reflects the group’s £8.4bn “credit strength”.

The vehicle will not be the first time THFC has applied a ‘sustainable’ label to its issuance, after subsidiary Blend previously moved to convert its existing 2061 maturity to a sustainable bond in November 2021. This followed the conversion of almost £1bn of issuance through Blend to ‘social’ bonds earlier the same year.

THFC said TSF enables it to take its environmental, social and governance (ESG) commitments further, with key pillars from the Sustainability Reporting Standard (SRS) being integrated into core THFC issuances.

The SRS was launched in the UK in November 2020 by Sustainability for Housing and The Good Economy to provide a common reporting framework for the sector.

Fenella Edge, group treasurer at THFC, said: “Launching a new programme with an A stable rating alongside our Blend programme, rated A2 by Moody’s, gives us two well-rated vehicles, both of which will issue under THFC’s strong sustainability framework, and which we believe will be attractive to our investors and clients and sets us apart.”

Arun Poobalasingam, head of relationship management and business development at THFC, said: “As the sector continues to look at ways to solve the UK’s affordable housing shortage, both through new supply but just as importantly investing in their existing homes, we will continue to come up with funding solutions that can help them do this.”

THFC completed the documentation on the £2bn euro medium-term note programme for the new subsidiary on 24 March.

In March last year, THFC sold £27.5m of retained bonds in two deals, despite ongoing market turbulence caused by Russia’s invasion of Ukraine.

Earlier this month, another bond aggregator became the first sector entity to issue new bonds this calendar year through funding vehicle Saltaire Finance. ARA Venn, which runs the Affordable Homes Guarantee Scheme, issued £350m of the government-backed bonds, of which it lent a share of £250m to three housing associations and retained £100m for future use.

The issuance could be an early sign that housing associations are ready to borrow again in the new rate environment, some commentators have suggested.