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 dateMaturity dateVolume (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.”

SAM DIREEN HOUSING NEW ZEALAND

“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.”

SAM DIREEN HOUSING NEW ZEALAND

“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.”

SAM DIREEN HOUSING NEW ZEALAND

“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.”

SAM DIREEN HOUSING NEW ZEALAND