In addition to being the first social bond issued by a Finnish entity, MuniFin’s debut social bond also claims the title of the first Nordic social bond in the SSA category. The 15-year EUR 500 million product was met with overwhelming investor demand, and the bond, issued on September 3rd, was overbooked by nearly four times.
With its introduction of the social finance product, MuniFin aims to encourage investments that have a notably strong impact and bring about wide-ranging social benefits. The first projects to receive financing within the MuniFin Social Bonds Framework were announced in June. These projects involve schools, hospitals and healthcare centers as well as housing for people with special needs.
Social bonds expand MuniFin’s range of sustainable finance products. The company has been an active green bond issuer for four years and it is now expanding the offering into social bonds.
On 10 September 2020, Nasdaq announced that Municipality Finance Plc has listed its inaugural social bond on the Nasdaq Sustainable Debt Market at Nasdaq Helsinki. The bond notional is EUR 500 million with a maturity of 15 years, explicitly guaranteed by the Municipal Guarantee Board. MuniFin’s issuance is the first social bond listed on Nasdaq Helsinki and the first social bond issued by an SSA (Sovereigns, Supranationals, Agencies) issuer in the Nordic countries.
MuniFin has been an active green bond issuer for four years and is now expanding the offering into social bonds. The proceeds of the social bond issue will finance projects that fall into one of the three categories of social housing, welfare and education and they promote equality, sense of community, wellbeing and vitality of regions and/or municipalities. The first financed projects include schools, hospitals and health care centres and housing for people with special needs.
– We are extremely proud to be in the forefront of Nordic and European sustainable finance. Even if all of our financing is aimed at building and developing the Nordic welfare state, social finance is a flagship product that highlights the wide-ranging effects that municipal and non-profit housing investments have both on individuals and the society as a whole, said Esa Kallio, President and CEO at MuniFin.
– The investor response for our inaugural social bond was overwhelmingly positive. This is a strong testimony that the financial markets want to actively transform societies and make them more sustainable.
– With the help of issuers such as MuniFin, we have in recent years seen Nasdaq develop into an important hub for sustainable investments in Europe with more than 230 bonds listed on Nasdaq´s Sustainable Debt Market. Following many international firsts, such the first green corporate bond by Vasakronan and first city bond issued by Gothenburg, Sweden, we are especially happy to see continued leadership coming from the Nordic region, said Ann-Charlotte Eliasson, Head of European Debt Listings and Sustainable Bonds at Nasdaq.
– We are excited to welcome MuniFin, a Finnish pioneer in sustainable finance, as our first social bond issuer in Finland, said Henrik Husman, President of Nasdaq Helsinki.
– MuniFin was also our first green bond issuer in 2018, and we have now five sustainable bonds listed on Nasdaq Helsinki. We look forward to seeing additional issuers following this trend.
Last week MuniFin mandated BNP Paribas, Credit Agricole CIB, DZ Bank and SEB to organise investor calls for the upcoming inaugural Social Bond. After series of investor calls and positive feedback from investor community, MuniFin opened books for the inaugural Social bond on Thursday 3rd of September. The 15-year EUR 500 million social bond pays an annual coupon of 0.05% with a yield of 0.068%.
– The work the MuniFin team have done has built on their strong reputation in the ESG space and has been rewarded with a huge following from sustainable investors and excellent execution. This framework and transaction sets the benchmark for other Nordic institutions to follow, comments Robert Matthews from BNP Paribas.
More than 91% of the bond was distributed to European investors. Almost one third of the bond was allocated to Germany, Austria and Switzerland and nearly one fifth to Nordic coutries. Asset managers took the largest share by representing almost half of the investors, with significant demand from SRI investors.
– The terrific invest interest did not come as a surprise for us as we see more and more investors wanting to invest in projects that support sustainable development. In 2016, we were the first green bond issuer in Finland. After being an active green bond issuer for a few years, it was time to expand the sustainable product offering to our clients and introduce social bonds to our investors. Considering our customer base of municipal and social housing sectors, expanding the sustainable product offering was a natural step for us, says Esa Kallio, the President and CEO of MuniFin.
MuniFin is a wholly public sector owned company whose sole mandate is to secure financing to the Finnish municipalities and non-profit housing organisations. It has been an active green bond issuer for four years and it is now expanding the offering into social bonds.
MuniFin’s inaugural social bond is the first of its kind issued by an SSA (Sovereigns, Suprana-tionals, Agencies) issuer in the Nordic countries.
Making the impact visible
MuniFin’s Social Bonds Framework has been drafted in accordance with the ICMA Social Bond Principles and it has three main categories: social housing, welfare and education. The Second Opinion has been provided by ISS ESG, stating that the Framework significantly contributes to four of UN’s Sustainable Development Goals.
With its new social finance product launched in the spring 2020, MuniFin aims to encourage investments that have a notably strong impact and bring about wide-ranging social benefits.
With the introduction of the social finance product, MuniFin wishes to showcase projects that are in line with the company’s view of social finance. The first financed projects include schools, hospitals and healthcare centres, and housing for people with special needs.
– Although the finance we provide can be considered already quite social in nature, we wanted to find projects that ultimately benefit the vulnerable population and address some key social challenges such as social exclusion and inequality, but also further promote Finland’s welfare state and education system, which are among the best in the world, says Antti Kontio, the Head of Funding at MuniFin.
The social finance projects are approved by the Social Evaluation Team. The team consists of external and internal social impact experts.
Issuer:
Municipality Finance Plc (MuniFin)
Rating:
Aa1 / AA+ (Moody’s/S&P – both stable)
Issue size:
EUR 500mn (no-grow)
Payment date:
10th September 2020 (T+5)
Maturity date:
10th September 2035
Coupon:
0.05%
Re-offer price:
99.731%
Re-offer yield:
0.068%
Re-offer vs. mid swaps:
+9bps
Re-offer vs. benchmark:
DBR 0% 05/15/35 + 33.6bps
Lead managers:
BNP Paribas / Credit Agricole CIB / DZ BANK / SEB
Further information:
Esa Kallio President and CEO Tel. +358 50 337 7953
Antti Kontio Head of Funding Tel. +358 50 3700 285
Municipality Finance Plc will publish its half year report for January–June 2020 on 14 August 2020. A webcast for investors and other stakeholders will be arranged in English on 14 August at 1:00 pm CET / 2:00 pm EET and broadcast live at munifin.videosync.fi/half-year-report-2020/register.
Presentations:
Esa Kallio, President and CEO
Timo Vesala, Chief Economist
Joakim Holmström, Head of Capital Markets
There will be an opportunity to ask questions via chat
channel after the presentations.
You can register for the webcast in advance or just before the live broadcast time. Registration and viewing are accessible from the same link at munifin.videosync.fi/half-year-report-2020/register. A recording is available after the webcast at the same address.
MuniFin took advantage of the favourable market condition to announce the mandate of their first USD benchmark transaction of 2020. This 3-year benchmark follows MuniFin’s successful EUR transactions in January and April. Following the volatile spring, MuniFin was able to deftly identify an open issuance window and gather an impressive order book of the highest quality.
The transaction was announced to the market at 13 pm
London time on Monday 22nd June 2020, with investors invited to
reflect Indications of Interest (IOIs) for a USD benchmark transaction. Initial
Price Thoughts – IPTs – of MS+19bps area were released in tandem, representing
a marginal new issue concession to fair value.
The investor response throughout the
European afternoon and overnight US sessions was strong, with IOIs exceeding
USD 2.1bn by the London open on Tuesday 23rd June. Due to the
quality of the order book, price guidance was revised by 2bp to MS+17bps area.
Momentum continued throughout the London morning reaching USD 2.8bn (Excluding
Join Lead Manager interest). At this stage, the decision was taken to tighten
and set the spread at MS+16bps in order to provide clarity to investors.
Given the USD1bn capped deal size and in order to
limit further order book growth, it was decided that books would go subject
just twenty minutes later at 9.30am London time.
The bond priced with a final spread to the 3yr US
Treasury of 21.1 bps which represents for a 3y USD benchmark the tightest MS
spread for an Agency issuer in 2020. Despite this, the demand from the Official
Institution and Central Bank community was significant at 68%. In terms of
geographical distribution, the bond was evenly distributed across EMEA, Americas
and Asian-based investors alike.
MuniFin has funding
requirement of EUR 9.5bn for 2020 and after this transaction MuniFin has
completed EUR 6.4bn of the funding for the year.
Comments from the bookrunners
“MuniFin showed skill this week by feeling the excellent market conditions and accelerating a project that would perhaps otherwise have been scheduled for next month. The timing of the announcement yesterday proved on point thus attracting the biggest ever USD IOI book for MuniFin and a very successful transaction overall which confirms MuniFin’s high reactionary stature among its peers.” Jonas Ulrich, Director, SSA DCM, Deutsche Bank
“A fantastic outcome for MuniFin, taking advantage of favourable conditions to price the tightest 3-year USD benchmark versus MS from a European agency since the pandemic outbreak. The high quality of orders that reached one of the issuer’s record book sizes is proof of MuniFin’s strong recognition with global investors.” Angelica-Maria Strolz, Executive Director, SSA DCM, J.P. Morgan
“A fantastic transaction by MuniFin for their first USD benchmark of 2020. Attracting demand in excess of $2.8bn whilst also pricing through their outstanding USD curve is a clear testament to the unique qualities of their credit, along with the strong following that MuniFin enjoys across the global investor base. Congratulations to the whole team!” Stuart McGregor, Managing Director, SSA Syndicate, RBCCM
“We applaud MuniFin on a truly excellent return to the USD market, in what was a flawlessly executed and well timed transaction. By taking advantage of a clear issuance window, MuniFin ensured full investor focus on their transaction and it paid off; with an order book dominated by high quality Central Banks and Bank Treasuries.” Laura Quinn, Head of Origination, TD Securities
Issuer
Municipality Finance Plc (“MuniFin”)
Rating
Aa1/AA+ (all stable)
Issue size
USD 1.0 billion
Settlement date
1 July 2020 (T+6)
Maturity date
1 September 2023
Coupon
0.375% payable semi-annually
Re-offer price
99.855%
Re-offer yield
0.421%
Re-offer vs benchmark
T 0.25% June/23 + 21.1bps
Re-offer vs mid-swaps
+16bps
Lead managers
Deutsche Bank, J.P. Morgan, RBC Capital Markets and TD Securities
On June 12th, 2020 MuniFin issued a new 3-year NZD 150
million public Kauri transaction in New Zealand. Previous public transaction in
New Zealand was issued in 2013, which matured in May 2020. Prior to launching
the transaction MuniFin organised an investor call targeted for domestic
investors and based on the positive feedback, MuniFin decided to move forward
and launch a public transaction.
”We were positively surprised with investor demand”,
says Antti Kontio, Head of Funding at MuniFin. ”The order book grew to NZD 270
million so we could have printed a larger trade but unfortunately due to our
good liquidity situation we could do only NZD 150 million. We will, however, be
open for taps on that line in the future. Kauri market acts as an excellent diversification
tool for MuniFin in terms of currency and investor base”, Kontio says.
The new 150 million NZD Kauri is repo eligible in the
Reserve Bank of New Zealand and pays an semi-annual coupon of 0.625% and was
priced 46 basis points over mid-swaps and 39 basis points over the New Zealand
Government bond. Bank of New Zealand (BNZ) acted as a sole lead manager.
“With seven years since the last issue, NZ investors
very much appreciated the call with the MuniFin team, and were straight away
interested in a transaction following it. There was a very good uptake of the
transaction by real money investors, demonstrating the confidence they have in
the credit”, said Mike Faville, who is leading the Capital Markets function at
BNZ.
Bank of New Zealand has been running a programme to
plant 100 Kauri trees for each Kauri bond issue we lead, and there are now over
10,000 trees already planted. “We really look forward to planting another 100
trees in honour of MuniFin for this transaction, to join the 100 from the last
deal”, Mike Faville concludes.
Further information:
Antti Kontio Head of Funding, MuniFin tel. +358 50 3700285
Mike Faville Head of Capital Markets, Bank of New Zealand tel. +64 9 375 1391
Social finance is available to MuniFin’s customers, i.e. the local government organisations and operators within non-profit housing production. The projects to be financed must belong to one of the eligible project categories within MuniFin’s framework of social finance: housing, wellbeing or education. Another requirement is that the projects promote equality, a sense of community, wellbeing or the vitality of the municipalities or areas.
–
MuniFin’s customers are responsible for a significant portion of the
investments made in building the Finnish society and its infrastructure. We
need to examine the need for investments, as well as the benefits and economic
effects of investments broadly and in the long term, not only from the point of
view of their economic, but also social and environmental impacts, says
MuniFin’s Head of Customer Finance Aku
Dunderfelt.
– Social investments have a much more extensive impact than most people realise. A library or public swimming pool, for example, influence people’s overall wellbeing and the community in multiple ways, Dunderfelt explains.
The first social financing projects were approved at the end of May. The projects are assessed and approved by a three-member evaluation team that comprises Jouni Parkkonen, Executive Directorof Association for Advocating Affordable Rental Housing – KOVA, researcher of municipalities Jenni Airaksinen from Tampere University and Financial Specialist in charge of social funding, Päivi Petäjäniemi, from MuniFin.
– The first approved projects for social finance are excellent examples of the spectrum of investments with a strong impact. Well-designed schools and student housing, for example, can have a wide-ranging impact on children and young people’s sense of security and community. Good design increases wellbeing but also prevents social exclusion, Päivi Petäjäniemi says.
Approved social finance projects
Foundation for Student Housing in the Helsinki Region (Hoas), several buildings Investing in the long life cycle of buildings constitutes sustainable urban construction that takes environmental impacts into account. Communal, high-quality housing for students plays an important role in supporting young people at a significant turning point in their lives and helps to create the preconditions for building an active, healthy everyday life and for preventing social exclusion.
Karstula comprehensive school, Karstula Well-functioning, healthy and safe facilities for early childhood education and teaching are a foundation for the well-being of children, teenagers and teaching staff alike. Solutions that support safety and a sense of community can have a significant effect on children and teenagers’ self-esteem and later life. Using the school as a venue for village events will bring vitality to the village andstrengthen community spirit and add to the municipality’s attractiveness.
Housing by Setlementtiasunnot, Jousenpuistonkatu, Espoo Setlementtiasunnot is a producer of housing whose housing concept is truly praiseworthy, as it diversifies the concept of ‘normal’, integrates members of special groups into the rest of society and supports the strengthening of all the residents’ sense of community. Communal housing solutions allow special groups to become involved with the wider community, which reduces loneliness, increases participation, prevents social exclusion and decreases the need for institutional housing and care. Some of the residents of these buildings are immigrants, and the project may profoundly promote their integration.
Sodankylä municipality, Sopukka Wellbeing Centre The evaluation team found the justification for the project very well founded. The circumstances in Northern Finland are exceptional due to the long distances, and regional challenges are considerable. Sopukka Wellbeing Centre’s operating model will boost the use of expert resources, make the healthcare supply chain more effective, considerably improve the safety of the region’s inhabitants and increase the region’s attractiveness.
Turku Student Village Foundation, Tyyssija student housing, Turku Tyyssija is an ambitious sustainable development project that will impact the environment and community spirit in a versatile way. Communal, high-quality housing for students plays an important role in supporting young people at a significant turning point in their lives and helps to create the preconditions for building an active, healthy everyday life and for preventing social exclusion.
Versonsilmu Oy, Versokoti housing complex Safe and well-functioning housing solutions improve disabled children and teenagers’ access to education. Living close to the necessary services will increase their self-reliance and help them be more active, which in turn will considerably improve their mental and physical wellbeing. It will also make it easier for them to integrate with the rest of society, which will have long-term effects on the residents’ adult life.
Forerunner of responsible financing in Finland
MuniFin was the first Finnish credit institution to offer green finance back in 2016. It was also the first financial institution to provide social finance in the Nordic countries.
Responsible
investment opportunities are more and more in demand in international capital
markets. Resources for social finance are acquired through bonds earmarked for
social projects, which are the focus of great investor demand. In 2016, MuniFin
was the first Finnish green bond issuer. It is also at the front line of
European financial institutions to issue social bonds.
Covid-19 pandemic will impact the borrowing needs of Finnish municipalities and social housing sector. MuniFin has strengthened its position as a market leader in its own customer sectors and estimates that its market share will continue to grow in the current challenging market environment caused by the pandemic.
Based on the new forecast, MuniFin has made small changes into the execution plan. Funding for the rest of the year will be carried out mainly as originally planned: through public benchmark markets and other tactical funding markets. As of April 17, 2020 MuniFin has issued approximately EUR 5.0 billion of new funding, which corresponds to 53% of full-year target.
The mandate for the new 5-year
benchmark was announced on Tuesday 14 April. Books were opened on Wednesday 15
April at 10:30am Helsinki time at mid swaps +20 area. Demand for the new
benchmark grew to EUR 2 billion when the books had been open for an hour. The
price guidance on the deal was thus revised to mid swaps +18 area. The final
spread was set after books had been open for ~1.5h at mid swaps +16 area, when
books had reached EUR 2.8 billion. The final order book was over EUR 3.6
billion when books closed.
The orderbook was of very high
quality. 46% of the allocations went to Central Banks & Official
Institutions, 45% to Banks, 7% to Asset Managers and 2% to Insurance/Pension
Funds. In terms of geography, 76% of the investors were from Europe (excl.
Nordics), 19% from the Nordics, 4% from Americas and 1% came from Asia.
The benchmark was priced at mid
swaps +16 area and pays an annual coupon of 0%. The spread over the OBL 0% due
April 2025 was 56.4 bps.
– It was an excellent achievement to issue such a successful benchmark under the current market backdrop. It was also exceptional that a benchmark was executed while working from home both at the issuer’s as well as the joint lead managers’ end. This demonstrates that MuniFin is able to ensure its basic duty of securing the financing of its customers under all market conditions, says Joakim Holmström, Executive Vice President, Head of Capital Markets at MuniFin.
– An impressive outcome for MuniFin’s second Euro benchmark of 2020. In a very challenging market, the transaction captured the attention of a broad range of investors resulting in a heavily oversubscribed issue highlighting the MuniFin’s well established investor base. Citi was pleased to have been part of this success, says Philip Brown, Head of Public Sector DCM at Citi, who acted as a joint lead manager in the deal.
During the 2019–2020 academic year, participants ran mini-companies that operated on real money as part of the JA Company Programme. The programme is carried out as part of the curriculum. In early 2020, more than 450 JA companies and 1,400 students took part in the semi-finals in 14 cities.
The Momo’s Bubbles team consists of Lucrezia Adora Ng, Raya Amokachi, Raha Torabihaghighi ja John Joseph who are Grade 9 students at Oulu International School.
Momo’s Bubbles serves Taiwanese bubble tea, a
milky tea drink with chewy tapioca pearls. While wildly popular in many
countries, bubble tea continues to be an exotic treat in Finland. In Oulu, Momo’s
Bubbles is the first company to serve this drink.
A personal and distinctive brand and enthusiastic approach
According to the competition’s jury, made up
of JA Finland’s partners, the business idea of Momo’s Bubbles was very topical.
The jury was particularly impressed with the company’s strong, authentic and
personal brand and the team’s approach to entrepreneurship.
“Momo’s Bubbles was positively bubbling with
joy. The team’s energy was infectious, but the customers also praised the actual
product, the bubble tea. During the programme, the team worked ambitiously to improve
their production process, develop new flavours and offer options to accommodate
for people with special diets”, says Kirsi Räbinä, director at MuniFin and jury member at the finals.
“The team members presented themselves very
naturally, and their cheerful brand image reflected the team very well. Their
business idea has great potential to grow and expand through collaboration
agreements or licensing”, said the jury. Although there are a host of chains
offering various beverages on the market, the jury was convinced that Momo’s
Bubbles would stand out from the competition in a positive manner.
Paying it forward
The Momo’s Bubbles logo sports the company
mascot, Momo the sloth. The company donates 10% of all sales to charity, using the
proceeds to help sloths that were endangered in the 2019 Amazon forest fires.
“The Momo’s Bubbles team is going to go far. They are striving
to move forward and are passionate about making their mark on the world”, commends
Kirsi Räbinä.
The prize for the MuniFin #Huomisentekijät signature
award is a sparring session with Jenny Pitkänen of
the YouTube channel Jennysvoices. Pitkänen
is a JA alumni whose JA company once made it to the national finals in the Company
of the Year Competition.
Because social media has played a vital role in
Pitkänen’s career, she will give the winning team tips on how to market their
company on social media. The winners can decide together with Pitkänen what other
topics the sparring session will cover.