Housing association Orbit, which manages around 44,500 homes throughout the Midlands, East and South of England, has completed a £300m bond issuance with a spread of 135bps over gilts and a coupon of two per cent.
The 18-year issuance has an all-in price of 2.07 per cent.
The bond launched to investors on Monday (16 November) and the final prospectus was approved on Friday (20 November), with an issue price of 98.908 per cent.
The group said that after “high levels of investor engagement”, the transaction received over £1.75bn of orders at the point of final guidance, representing an order book seven times oversubscribed for Orbit’s planned benchmark (£250m) issuance.
This led to a tightening of 20bps from initial pricing thoughts, alongside a new issue concession of 5bps. Orbit said that investor interest reflected the strength of its “credit standing, strategy and market-leading ESG credentials”.
The group has set out an ambitious approach to delivering environmental, social and governance (ESG) actions, including the ‘Orbit Earth’ strategy outlined in its 2025 corporate strategy which will see it work towards zero-carbon targets and improving green spaces and biodiversity.
In September, the provider produced a report in conjunction with the Chartered Institute of Housing, which called for the government to speed up the delivery of its promised Social Housing Decarbonisation Fund, and to increase funding to distributions of £400m per year from 2021/22. The two organisations are working on a detailed guide to decarbonisation for social landlords to be published next year.
Orbit is also one of 43 housing associations to have signed up as an ‘early adopter’ of the new sector standard for ESG reporting, the Sustainability Reporting Standard for Social Housing, which was launched by a sector working group earlier this month after more than a year of consultation.
However, Orbit’s recent issuance does not have an official ‘ESG wrapper’ in line with principles defined by the International Capital Markets Association (ICMA), such as a ‘green’, ‘sustainability’, or ‘social’ label.
On 9 November, Clarion launched its – and the sector’s – second ‘sustainability’ bond, beating its own pricing record as it achieved a coupon of just 1.25 per cent, and a spread of 95 basis points over gilts on the 12-year £300m issuance.
Clarion adopted the pan-European Certified Sustainable Housing Label through German consultancy Ritterwald in November 2019, and made its first issuance using the label in January with a £350m bond, issued from its £3bn Euro Medium-Term Note programme.
Orbit is rated A3 by Moody’s, and was graded G1 for governance and V2 for viability by the Regulator of Social Housing in its latest strapline judgement last December (2019).
Orbit’s two per cent coupon is in line with the coupon paid by L&Q on its recent 18-year secured issuance. That £250m bond, also rated A3 by Moody’s, priced at 140 basis points (bps) on 13 October.
Commenting on Orbit’s deal, Jonathan Wallbank, its group finance director, said: “From the outset of this transaction, our objective was to attract as many quality investors as possible and position Orbit strongly in the market. We are therefore delighted by the landmark levels of interest received from the investor community, which is a clear reflection of Orbit’s strong credit fundamentals.
“This funding meets our corporate finance objectives and supports our vision at a time when affordable, quality homes and services are needed more than ever.”
HSBC, NatWest Markets and Santander were joint bookrunners on the deal, while Rothschild & Co acted as financial advisors to Orbit.