Wellbeing bonds to align with government objectives, says Housing NZ
Housing New Zealand (Housing NZ) tapped two of its existing lines on 11 September for an aggregate NZ$600 million (US$383 million). The transaction was the first under a rebranded framework which incorporates all the issuer’s outstanding lines as wellbeing bonds explicitly to signal alignment with the New Zealand government’s broader wellbeing objectives.
The dual-tranche deal comprised of a NZ$425 million increase to Housing NZ’s 2025 line and a NZ$175 million increase to its 2028. The deal was initially slated for July but was postponed following the appointment of a new minister for housing and urban development at the end of June.
When the deal was reannounced on 5 September, Housing NZ revealed that it had amended its sustainability-finance framework to incorporate all its outstanding and future lines under the framework as wellbeing bonds. Housing NZ priced its first sustainability bond – a NZ$500 million, 7.5-year deal – in March this year.
ANZ assisted Housing NZ with the update, which the issuer says builds on the work done by BNZ to establish the framework in March 2019.
Between 1 July and 10 September, when Housing NZ launched the deal, more than NZ$4 billion of syndicated bond supply came to the New Zealand dollar market (see chart 1). The busy period meant some offshore investors were full on New Zealand dollars and resulted in a lower distribution to offshore accounts than in Housing NZ’s previous transactions (see table), according to the issuer.
Deal pricing
Issuer name: Housing New Zealand
Issuer rating: AA+ (S&P)
Pricing date: 11 September 2019
Total volume: NZ$600 million
Geographic distribution: see chart 2
Lead managers: ANZ, Westpac Banking Corporation New Zealand Branch
2025 increase
Maturity date: 12 June 2025
Volume: NZ$425 million
Total outstanding in the line: NZ$675 million
Coupon rate: 3.36%
Issue/re-offer price: 110.780108% +96 days accrued
Issue yield: 1.398%
Margin to swap: 28bp/mid
Margin at launch: 26-30bp/mid
2028 increase
Maturity date: 18 October 2028
Volume: NZ$175 million
Total outstanding in the line: NZ$425 million
Coupon rate: 3.42%
Issue/re-offer price: 113.784236% +151 days accrued
Issue yield: 1.771%
Margin to swap: 44bp/mid
Margin at launch: 42-46bp/mid
Housing NZ deal distribution by geography
| Pricing date | Maturity date | Volume (NZ$m) | New Zealand distribution (per cent) | Offshore distribution (per cent) | Number of investors |
|---|---|---|---|---|---|
| 1 Jun 18 | 12 Jun 23 | 250 | 89 | 11 | 17 |
| 1 Jun 18 | 12 Jun 25 | 250 | 87 | 13 | 19 |
| 12 Oct 18 | 12 Jun 23 (tap) | 50 | 99 | 1 | 7 |
| 12 Oct 18 | 18 Oct 28 | 250 | 86 | 14 | 15 |
| 28 Mar 19 | 5 Oct 26 | 500 | 79 | 21 | 20 |
| 11 Sep 19 | 12 Jun 25 | 425 | 95 | 5 | 13 |
| 11 Sep 19 | 18 Oct 28 | 175 | 95 | 5 | 10 |
Source: Housing New Zealand 17 September 2019
Source: KangaNews 17 September 2019
Source: Housing New Zealand 17 September 2019
“We could clearly see the alignment between our activities and the wellbeing agenda of the government. Updating the framework to reflect this alignment more explicitly made it a natural progression in the evolving space of ESG financing. We hope this initiative further highlights to the market how core the activities of Housing NZ are to government policy.”
“We have a lot of indicators of the social impact of Housing NZ’s activities, many of which align with what has been defined in the living standards framework. Looking forward, we plan to work with Treasury and other public-sector entities to develop additional impact measures that are clearly related to improved wellbeing.”
“The book built solidly through the New Zealand session but flattened during the Asian and European timezones. The feedback we received was that some offshore accounts are not currently adding to New Zealand dollar positions while others are waiting for lines to increase before participating.”
“We are a developing issuer and know of several investors that are in the process of establishing credit lines, so we are confident we will see increased diversification of our investor base over time.”
