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Charity bond raises £10m in oversubscribed offering
- Golden Lane Housing bond has raised its £10 million target
- Bond closed early due to unprecedented demand
- New houses to provide lasting legacy for future generations with learning disabilities
- UK Government actively promoting the UK as a global leader in social investment
This innovative charity bond has reached its £10m target setting a model for future issues in the sector. The bond issue closed early due to unprecedented interest from retail- as well as from institutional investors. The extraordinary demand resulted in an oversubscription of the bond.
"It is clear to us that the market is ready for this kind of product. We see a growing appetite from individual investors wanting to put their money to work to achieve both a solid financial return as well as helping a respected charity to pursue its goals."
Dan Hird, Head of Corporate Finance at Triodos Bank
Dan Hird, Head of Corporate Finance at Triodos Bank commented: "This is a great result - not only for Golden Lane Housing but for the UK social investment market generally. It is clear to us that the market is ready for this kind of product. We see a growing appetite from individual investors wanting to put their money to work to achieve both a solid financial return as well as helping a respected charity to pursue its goals."
The funds raised through the bond are being used by Golden Lane Housing (a wholly owned subsidiary of Mencap) to acquire freehold properties which will be specially adapted to house people with a learning disability. With a fixed gross yield of 4% per annum for the five year fixed term, the bond provides a compelling combination of financial returns and social benefit.
The growth of charity bonds is gaining momentum. Earlier this month Prime Minister David Cameron stated that, "social investment can be a great force for social change," and said his government will give tax breaks to investments that qualify as having a "social impact".
Alastair Graham, Director of Golden Lane Housing, said: "This bond has been a huge success for us. We have already bought our first four properties using this capital to provide desperately needed homes for people with a learning disability. We have a pipeline of future properties for purchase all across the country to enable people currently living in inappropriate institutional settings, or with parents who can no longer cope, to live with support in the community. These homes will be a lasting legacy for future generations of people with a learning disability. We're considering whether a further bond issue will allow us to do even more."
Leigh Pearce, manager of the Nationwide Foundation, which invested in the GLH bond commented: "As an early investor into this bond, we are thrilled that the bond has subsequently proved so successful. Our motivation for investing was the appeal of the replication of this model of social investment, which could mean many more decent, affordable homes can be built for vulnerable people."
Most importantly these bonds will enable charities and social enterprises to finance themselves cost effectively in order to achieve greater social impact.
As a longstanding leader in the social investment market, Triodos Bank is planning to issue more charity bonds later this year as a number of charities and social enterprises look to this form of financing in order to develop their commercial activities and support their charitable objectives.
A charity bond is a simple fixed income, investment product. It is similar in structure to any standard corporate or government bond where the borrower enters into a formal contract with investors to repay a loan at maturity, with interest paid at fixed intervals over the life of the bond. The bond itself can be issued as either secured or unsecured debt. The payment of interest and repayment of capital isn't tied to specific social outcomes as it would be for a social impact bond.
Social investment is an emerging investment class which involves generation of a blended social and financial return on capital for the investor. Social investment can include equity, bonds (charity bonds, social impact bonds) or other forms of debt which are typically issued by charities and social enterprises. The social return is achieved as a result of the deployment of capital raised by the issuer in sustainable and social beneficial activities.
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Important notice: This article has been approved by Triodos Bank NV. It does not constitute an offer or invitation to subscribe for bonds. Golden Lane Housing Limited published an Investment Memorandum in February 2013. Applications could only have been made on the basis of, and subject to, the information contained in the Investment Memorandum. Investments can go up as well as down. Golden Lane Housing Limited is a private company limited by guarantee, registered in England and Wales with registered office at 123 Golden Lane, London EC1Y 0RT (registered number 3597323). Registered with the Charity Commission with registered charity number 1071097.
About Triodos Corporate Finance
Triodos is one of the world's leading sustainable banks. Its advisory arm, Triodos Corporate Finance, works exclusively with sustainable businesses and has a long track record of advising businesses on raising capital through private placements and retail offers. Over the past 3 years, Triodos Corporate Finance has raised over £45 million for businesses within the sustainability sector with investments from institutions, charitable foundations, private high net worth individuals and retail investors. www.triodos.co.uk
About Golden Lane Housing
Golden Lane Housing is a national housing charity that provides supported living housing for people with a learning disability. Since being established by Mencap in 1998, Golden Lane Housing has housed over 1,100 people and invested over £70 million in housing. Golden Lane Housing works throughout England and Wales.
There are 1.5 million people with a learning disability in the UK. Mencap works to support people with a learning disability and their families and carers by fighting to change laws and improve services and access to education, employment and leisure faciliti. Mencap supports thousands of people with a learning disability to live their lives the way they want.
Golden Lane Housing was awarded £349,000 from the Big Lottery Fund (BIG) to help develop its bond proposition. The funding was allocated under BIG's Next Steps: Supporting Social Investment in England scheme, which is exploring the potential of new approaches to raising finance that will help address significant social issues.
About Big Lottery Fund (BIG)
Big Lottery Fund (BIG), the largest distributor of National Lottery good cause funding, is responsible for giving out 40% of the money raised for good causes by the National Lottery. BIG is committed to bringing real improvements to communities and the lives of people most in need and has been rolling out grants to health, education, environment and charitable causes across the UK. Since its inception in 2004 BIG has awarded close to £6bn. Visit www.biglotteryfund.org.uk for more information.