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Paradigm Housing Group has issued a £350m sustainability bond.
The funding marks Paradigm’s first ever issuance in the public bond markets and follows the housing association’s creation of a Sustainability Finance Framework, which embeds environmental, social and governance (ESG) factors into its strategy.
Over the last 30 years, Paradigm – a housing association formed through the very first large scale voluntary transfer of homes from Chiltern DC to Chiltern Hundreds HA – has become one of the largest social housing providers in the counties of Buckinghamshire, Hertfordshire and Bedfordshire.
Issuing a sustainability bond under Paradigm’s recently established framework reinforces Paradigm’s commitment to becoming a net zero carbon business by 2050, in line with the objectives set out in its recently published Corporate Plan 2021-26.
Paradigm priced its debut 30-year bond on Wednesday (12 of May 2021) at a coupon of 2.250%, with £250m of bonds sold to investors in the first instance, and £100m of the proceeds retained for later sale, as and when the group requires the further funding.
The £250m of bonds were priced at a spread of 88 basis points – or a margin of 0.88% – over the government cost of borrowing, known as gilts. That resulted in an all-in cost of just 2.279%.
The transaction attracted strong engagement from investors, with the bonds being three times oversubscribed and investors placing £795m worth of orders.
Nicola Ewen, Executive Director of Finance at Paradigm, said: “We are pleased to have issued our debut sustainability bond to support our newly published corporate plan. The rating we received and the feedback on the issue reinforces our financial strength, strong management and our commitment to building and investing in safe and sustainable homes in our operating area.”
Matthew Bailes, Chief Executive at Paradigm, said: “The feedback we got from investors and the margin we achieved reflected the strength of the business and the grip we have on efficiency, risk, development and operational delivery.”
The bond comes after Paradigm was awarded an A+ credit rating, with a stable outlook, by Standard & Poor’s (S&P). An A+ rating is one of the stronger ratings in the HA sector, with S&P observing that it is “underpinned by the group’s focus on affordable development, strong demand for the group’s units stemming from its geographical footprint, and its excellent asset quality”.
S&P also remarked on the group’s very strong liquidity and robust operating margins, with financial performance expected to remain solid despite the commitments to increase investments in the energy efficiency of the group’s existing homes.