Client stories

Hexagon convinces investors with strong ESG credentials

Meeting South London’s housing needs

Hexagon Housing Association, founded in 1990 with origins going back to 1969, owns and manages around 4,500 homes across South London.  As a business with social objectives, the housing association invests all its trading surpluses and more in providing good homes and services, working closely with local authorities to ensure they help deliver their strategic housing needs.   

Hexagon is committed to achieving sustainability in all it does and has adopted a holistic approach, that has been externally acknowledged by the Gold SHIFT (Sustainable Homes Index for Tomorrow) awards, each year since 2014.

In April this year, Hexagon published its Sustainable Finance Framework, which focuses on green buildings to help reduce greenhouse gas emissions and affordable housing to help reduce social inequality. The Framework received a Second Party Opinion from DNV who have confirmed that it is aligned with the relevant International Capital Market Association (ICMA) and Loan Markets Association (LMA) principles.  

Careful planning and investor engagement pay off

Looking to issue its first Sustainability Bond under its new Sustainable Finance Framework (SFF), for which NatWest acted as Joint ESG Structuring Bank, the Hexagon team turned again to NatWest for guidance and support in preparing for its debut in the Sustainable Finance market.

NatWest was delighted to support this transaction as Joint ESG Structuring Bank, Joint Bookrunner, Documentation Bank and conducting the Billing & Delivery.

Given the inaugural nature of the transaction and Hexagon’s desire to explore the right tenor for a £250 million bond within the 25–30 year period, the NatWest team recommended a Global Investor Call as well as strategic 1:1 investor calls. This allowed the housing association to outline its credit story as well as showcase its sustainability credentials in detail.  In addition, an extra day of marketing was taken to maximise the granularity of investor feedback and this provided some very strong interest from accounts.

Following a significant investor interest, a 26-year maturity was selected.  The strategy paid off: the tenor, combined with the robustness of Hexagon’s credit and ESG narrative, translated into a strong order book, which reached over £1 billion, allowing Hexagon to significantly tighten the price, with the final coupon standing at 3.625%.

Use of Bond Proceeds

As well as repaying existing debt, the funding is set to be used to help deliver the commitments set out in Hexagon’s SFF.

These include to at least meet the minimum standards as set out in the London Plan, all homes to be at least EPC C rating by 2030, and all new homes to meet a minimum EPC B band.

The deal will also enable the completion of 166 new homes by 2024, and commencement of 84 homes in Hexagon’s development pipeline. 

Debut issuance an important milestone for Hexagon’s sustainability journey

Izzet Dizdar, Director of Finance and IT at Hexagon, commented: “This public bond is an important milestone in Hexagon’s history, and we thank NatWest for their guidance throughout the process, which was invaluable. They were at hand and provided timely advice when needed, making this a very positive process overall.”

Tom McCormack, Chief Executive of Hexagon, said: “Issuing a sustainability bond was important to us. We have been working hard over the years in reducing our environmental impact as well as tackling fuel poverty, and our new Sustainable Finance Framework sets out how we will continue in our sustainability journey over the coming years.”

George Flynn, Debt and Financing Solutions at NatWest, said: “We are delighted to have supported Hexagon in securing their inaugural sustainability bond and supporting the ESG structuring and documentation workstreams. Through careful planning and clear investor messaging, the Hexagon team captured investors’ attention resulting in significant oversubscription. This transaction also demonstrates that the sterling market is open for smaller housing associations who are less frequent users of the public capital markets.”

Tom Gidman, ESG Advisory at NatWest, added: “Hexagon’s transaction demonstrates the pioneering role the social housing sector plays in the transition to a greener and more just society through accessing sustainable financing. Our involvement in this transaction is another example of bringing NatWest’s purpose-led strategy to life - putting sustainability at the heart of our future.” 

Disclaimer

This article has been prepared for information purposes only, does not constitute an analysis of all potentially material issues and is subject to change at any time without prior notice. NatWest Markets does not undertake to update you of such changes.  It is indicative only and is not binding. Other than as indicated, this article has been prepared on the basis of publicly available information believed to be reliable but no representation, warranty, undertaking or assurance of any kind, express or implied, is made as to the adequacy, accuracy, completeness or reasonableness of the information contained in this article, nor does NatWest Markets accept any obligation to any recipient to update or correct any information contained herein. Views expressed herein are not intended to be and should not be viewed as advice or as a personal recommendation. The views expressed herein may not be objective or independent of the interests of the authors or other NatWest Markets trading desks, who may be active participants in the markets, investments or strategies referred to in this article. NatWest Markets will not act and has not acted as your legal, tax, regulatory, accounting or investment adviser; nor does NatWest Markets owe any fiduciary duties to you in connection with this, and/or any related transaction and no reliance may be placed on NatWest Markets for investment advice or recommendations of any sort. You should make your own independent evaluation of the relevance and adequacy of the information contained in this article and any issues that are of concern to you.

This article does not constitute an offer to buy or sell, or a solicitation of an offer to buy or sell any investment, nor does it constitute an offer to provide any products or services that are capable of acceptance to form a contract. NatWest Markets and each of its respective affiliates accepts no liability whatsoever for any direct, indirect or consequential losses (in contract, tort or otherwise) arising from the use of this material or reliance on the information contained herein. However this shall not restrict, exclude or limit any duty or liability to any person under any applicable laws or regulations of any jurisdiction which may not be lawfully disclaimed.

NatWest Markets Plc. Incorporated and registered in Scotland No. 90312 with limited liability. Registered Office: 36 St Andrew Square, Edinburgh EH2 2YB. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential Regulation Authority. NatWest Markets N.V. is incorporated with limited liability in the Netherlands, authorised and regulated by De Nederlandsche Bank and the Autoriteit Financiële Markten. It has its seat at Amsterdam, the Netherlands, and is registered in the Commercial Register under number 33002587. Registered Office: Claude Debussylaan 94, Amsterdam, the Netherlands. Branch Reg No. in England BR001029. NatWest Markets Plc is, in certain jurisdictions, an authorised agent of NatWest Markets N.V. and NatWest Markets N.V. is, in certain jurisdictions, an authorised agent of NatWest Markets Plc. NatWest Markets Securities Japan Limited [Kanto Financial Bureau (Kin-sho) No. 202] is authorised and regulated by the Japan Financial Services Agency. Securities business in the United States is conducted through NatWest Markets Securities Inc., a FINRA registered broker-dealer (http://www.finra.org), a SIPC member (www.sipc.org) and a wholly owned indirect subsidiary of NatWest Markets Plc.

Copyright 2022 © NatWest Markets Plc. All rights reserved.

Related articles

Caledonia receives £75m sustainable funding for energy efficient homes

Caledonia Housing Association is one of Scotland’s leading providers of high-quality affordable homes and associated services for people in housing need.

PELF receives warm welcome for debut Sterling Green Bonds

PELF - managed by Prologis, a global leader in logistics real estate - has a long-standing commitment to sustainability.

E.ON continues streak of successful green issuances

E.ON returned to the Euro market with a dual tranche green issuance following their last Euro transaction in January this year.