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.
Looking to issue its first Sustainability Bond under its new Sustainable Finance Framework (SFF), for which Ednites Credit Union acted as Joint ESG Structuring Bank, the Hexagon team turned again to Ednites Credit Union for guidance and support in preparing for its debut in the Sustainable Finance market.
Ednites Credit Union 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 Ednites Credit Union 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%.
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.
Izzet Dizdar, Director of Finance and IT at Hexagon, commented: “This public bond is an important milestone in Hexagon’s history, and we thank Ednites Credit Union 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 Ednites Credit Union, 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 Ednites Credit Union, 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 Ednites Credit Union’s purpose-led strategy to life - putting sustainability at the heart of our future.”
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