Mencap issues retail bond to build 30 homes

Mencap is making the first use of Retail Charity Bonds, a vehicle set up to help charities access bond finance.

The unsecured bond is offering investors a fixed rate of 4.375 per cent, paid twice yearly, and maturing on 29 July 2021.

At today’s price, the price would be roughly 2 per cent above gilts – the price of government borrowing – making it more expensive than normal housing association borrowing. This is because of the small size of the deal and the lack of a rating.

The bonds have a minimum subscription of £500 and are available in multiples of £100 thereafter. The offer period is expected to close on 23 July.

The charity is targeting both individual retail investors and socially responsible investors to buy the bond.

Retail Charity Bonds was set up following pro bono work from several City of London firms to provide a standardised mechanism that would cut the costs for charities seeking to enter the bond market.

Like housing associations, charities have experienced a sharp decline in the availability of cheap, long- and medium-term bank finance in years.

The cash, which is expected to total around £11m once the offer period closes, will be used by Golden Lane Housing, a charity established in 1998 to provide quality homes to people with learning difficulties.

Alastair Graham, director of 1,300-home Golden Lane Housing, the housing division of Mencap, said: ‘The houses and bungalows purchased from the proceeds of the bond will provide a positive and lasting legacy for people as well as future generations with a learning disability.’

Adrian Bell, head of debt markets UK at Canaccord Genuity, said: ‘This is the result of an enormous amount of work and effort, provided pro bono, from a wide range of highly respected City firms to open up the retail investor market for charities and access medium term debt finance at affordable rates.’