The Church of England Pensions Board (CEPB) has issued £100m of CPI-linked bonds to help house retired clergy.
Some £70m of the bonds, which are repayable in tranches between 2038 and 2048, were bought by Pension Insurance Corporation (PIC), with the remaining £30m retained to provide quick access to the capital markets at a future date if required.
The bond’s coupon of 3.126% increases annually with CPI subject to a 4% cap and a floor of zero, providing a good match for the CEPB’s rental income. It is believed to be the first ever sterling issue with the coupon linked to CPI rather than the principal.
The board is using part of the bond proceeds to acquire, in a single transaction, the economic interest in 196 properties in the Church Housing Assistance for Retired Ministers (CHARM) scheme, which had been financed by the Church Commissioners. This is part of a long-term strategy to keep or acquire properties, replace others as they become vacant and add further properties to give retiring clergy a wider choice as they approach retirement.
CEPB chairman Dr Jonathan Spencer, said: “The board is committed to ensuring that it can continue to provide those retiring clergy who need it with affordable housing in retirement. We decided the time was right to look at long term capital finance to help secure the future of the retirement housing (CHARM) scheme. This is the next step on our journey to build a portfolio of properties that will continue to meet future expected clergy demand.”
Alan Fletcher, Chair of the board’s Housing Committee, added: “This new long term financing arrangement will bring greater certainty over borrowing costs, by taking advantage of the current low interest rate environment.”
PIC, which was the sole investor in the issuance, claimed the deal was the start of a close working relationship. Head of debt origination Allen Twyning, said: “This is a high credit quality investment with the funding coming from the CEPB. We are pleased to have been able to work with the members of the team to reach financial close.
“The Church of England’s Pensions Board is widening the pool of high quality homes in its CHARM scheme to meet future demand. PIC is a provider of long term capital and has invested in a number of infrastructure and social housing programmes. We are therefore well placed to support the CEPB as it re-shapes its subsidised housing model. We look forward to a close working relationship.”
The paper was issued through a newly-established special purpose vehicle, CHARM Finance. The transaction was arranged by TradeRisks.
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