NHFIC lands its largest deal yet

Growing subscription from community housing providers (CHPs) to National Housing Finance and Investment Corporation (NHFIC)’s programme led to the agency’s largest social bond to date.

The A$562 million (US$390.2 million) 12-year transaction is also the first green, social and sustainability bond in the Australian market from a domestic name in 2020. The transaction takes NHFIC’s total outstanding bonds on issue to A$1.2 billion, following an inaugural transaction in March 2019 and a follow-up in November – both for A$315 million.

NHFIC’s matched-funding model means the A$562 million was the exact amount needed by underlying CHPs, despite a significant oversubscription.

The deal marks the first time proceeds will be directed to Tasmania, alongside New South Wales, Victoria and South Australia. Proceeds support 10 CHPs and finances 2,736 properties including 775 new dwellings, according to NHFIC.

Source: National Housing Finance and Investment Corporation 25 June 2020

Deal pricing

Issuer name: National Housing Finance and Investment Corporation
Issuer rating: AAA by S&P
Pricing date: 24 June 2020
Maturity date: 29 June 2032
Volume: A$562 million
Total outstanding in the line: A$562 million
Oversubscription: “circa three times”
Coupon rate: 1.41%
Lead managers: ANZ, UBS, Westpac Institutional Bank

Number of investors: 37
Final orderbook: ~A$1.5 billion
Margin: 47bp/EFP
Margin at launch: 55bp/EFP
Geographic distribution: see chart 1
Distribution by investor type: see chart 2

Source: National Housing Finance and Investment Corporation 25 June 2020

“Many of the transactions we were working on with CHPs predated the COVID-19 crisis. Our second transaction, in November last year, incentivised a lot of CHPs to come forward and take advantage of the low interest-rate environment.”

“We adopted a wait-and-see approach in March and April in response to COVID-19, but we were always targeting a June execution window. We were on track to reach a threshold of more than A$500 million worth of transactions which opens up a new class of investors, and the way markets unfolded confirmed it was the right time to issue.”

“Given how the unemployment rate and economy are tracking as a result of COVID-19, it is possible we are going to see higher demand for community housing. It is a really important time for investors to support the sector and to support Australians in need.”

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