INNOVATIVE FUNDING ROUTE FOR THIRD SECTOR CARE PROVIDERS Greensleeves Care has become the first care provider to raise funding for growth and development through a Retail Charity Bond. The Bond was so successful that it closed in under a week. Does it open the door for others to use similar approaches to raise funds? Given the current financial climate and the specific requirements of lenders to the sector, routes to finance for those providers looking to develop, expand or upgrade their services can be difficult. However, Greensleeves Care has found an innovative way to raise funds for investment through a Retail Charity Bond. Although Greensleeves Care does have access to the traditional financing routes, it selected this alternative approach to raise £33m for investment in the business, with a view to increase that to £50m as needed, and it only took a week to raise the funds.
GREENSLEEVES CARE Greensleeves Care is a not-forprofit care provider that developed from the Women’s Royal Voluntary Service. It supports 789 residents in 20 homes across the Midlands, South and East of England. It offers both care homes and care homes with nursing. The company is in a strong position with its quality of care, with nearly 85% of its rated homes having been awarded ‘Good’ or ‘Outstanding’ by the Care Quality Commission. Its five-year average occupancy sits at 93.9%, around 75% of its clients are privately funded and the remaining 25% are local authority or NHS funded. Although the company is in a strong position in the market, it is not immune to the pressures facing the sector, including rising costs, the National Living Wage and reductions in local authority fees. In 28 CMM May 2017
such an environment, it can make growth and business development difficult. The company decided to use the Retail Charity Bond platform to raise funds for investment as this funding source best supported the ongoing development strategy of the charity. The Bond facility offered Greensleeves the security of a known long-term interest rate and repayment profile, supported by borrowing covenants that it says better matched the aims of the organisation.
RETAIL CHARITY BOND The Retail Charity Bonds platform was created by Allia, a charity and specialist in social investment, to help charitable borrowers access finance that will enable them to grow and increase their social impact. Phil Caroe, Director of Impact Finance at Allia explained more, ‘Bond finance is typically far lighter on covenants than bank debt and doesn’t need to be secured on the borrower’s assets. It offers borrowing at a fixed cost, usually for up to ten years, as well as the opportunity to raise profile and connect with new audiences. ‘The demand from investors for retail eligible bonds is very strong, particularly for ethical investment opportunities. However, the costs and compliance burden of issuing listed bonds tend to make it prohibitive for borrowers to issue their own bonds for much less than £50m.’ Allia, therefore, set up Retail
Charity Bonds to make it simple and affordable for charitable borrowers to raise unsecured loan finance through bonds listed on London Stock Exchange. The platform was launched in 2014 with the first Bond for Golden Lane Housing which raised £11m, closed early and was oversubscribed. The funds were used to buy and adapt around 30 properties, providing homes for over 100 people with a learning disability. Two other Bonds have subsequently been issued, for Hightown Housing Association raising £27m, and Charities Aid Foundation raising £20m. The Greensleeves Bond is the largest-to-date at £33m, with the lowest interest rate and brings the total raised by the platform to £91m.
TERMS OF THE BOND The Greensleeves Homes Trust Retail Charity Bond was launched on 7th March and closed a week later, on the 14th, after raising £33m from a wide range of individual, ethical and institutional investors. The Bond will pay a fixed rate of interest at 4.25% per year, over nine years and is expected to mature on 30th March 2026, with a final legal maturity on 30th March 2028. The minimum initial subscription amount for investors was just £500. The finance from the Bond will enable Greensleeves to increase the number of residents it supports through buying and developing new homes, as well as going to pay off all existing debt. With a total of £50m of Bonds created, there is also the
option to raise up to a further £17m by selling more Bonds as needed in the future. Paul Newman, Chief Executive of Greensleeves Care, said, ‘We are delighted that we have been part of the largest ever Retail Charity Bond issue. The money will be put to immediate use to buy and develop new homes and sites as we invest in our portfolio and our ability to increase the number of older people who benefit from our awardwinning care.’
SUCCESS Following the success of this Bond, Allia expects more care home providers to look at raising funds in this way. Phil Caroe continued, ‘Quality care for the elderly is an increasingly vital issue in the UK. Allia is very pleased to help Greensleeves Care increase the number of older people they are able to look after, and through this Bond to demonstrate the appetite from investors for supporting the care home sector.’ CMM
OVER TO THE EXPERTS... Are retail bonds an alternative route to funding for the sector? Does the success of the Greensleeves Retail Charity Bond and the short timescales in which it raised its funding indicate a good appetite for investment in quality care? Will other not-for-profit care providers follow suit? What other routes to funding are there for providers at the moment?
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