THE Church Commissioners are hoping to raise half-a-billion pounds by issuing bonds for the first time, even though the cost of borrowing has been rising.
An investment presentation is said to have indicated that the Commissioners plan to issue fixed bonds in two tranches, to raise a total of £500 million.
The bonds are being referred to as “Cranmer bonds”. The Church Commissioners themselves have not issued any details of the scheme, though their chief executive, Gareth Mostyn, is said to have taken part in an investors roadshow. A church spokeswoman declined to comment on the story when asked on Thursday.
But a pre-stabilisation notice on the London Stock Exchange — “benchmark, exact size to be confirmed” — lists two maturation dates, 14 July 2032 and 14 July 2052.
The Financial Times, reporting the story this week, described the current market for bonds as “shaky. . . Corporate bond issuance in Europe is down 16 per cent in the first half of 2022 compared to 2021,” the paper noted, due to the rise of inflation and interest rate.
According to the FT and The Daily Telegraph, the Church Commissioners have hired three American banks — JP Morgan, Morgan Stanley, and Bank of America — to facilitate conversations with potential investors.
Without a direct explanation from the Commissioners, it is unclear why they wish to raise extra cash to supplement the income they receive from their £10.1-billion portfolio. A Bloomberg report suggested that the money was being raised to fund “environmental and social projects as well as other general purposes”.
The Financial Times quotes an investor prospectus that lays out the attractions of a church-based bond. This does warn, however, that claims for “historical failures in relation to safeguarding . . . could in future grow in scale from currently anticipated levels”; and also cites “a threat of, or actual, disestablishment of the Church of England from the State, particularly in the event that such disestablishment were to lead to a dispersal of the Issuers’ assets”.
Another risk of the plan is outlined by a banker quoted anonymously in International Financing Review, who argues that two-tranche bond offerings are “always a risky strategy. . . You need people to give focus because you’re asking for a lot of interest on both ends of the curve.”
Other bankers offered a more positive assessment, however. “It’s an ultra-high-quality credit, so they weren’t probably worried if the market is open or not,” said one. Another predicted that “the deal will go extremely well — it’s the kind of name that the sterling market really likes.”