Church of England taps debt markets with ‘Cranmer’ bonds

A Church of England investment foundation is appealing to bond investors for the first time, seeking to raise £500million amid a shaky credit market.

The Church Commissioners for England, a charity with £10bn in assets, plans to raise around £250m in bonds due to mature in 10-16 years, with an additional £250m tranche sterling that will mature in 30 years or more, according to an investor presentation. Funds raised will be used by the CCE, which employs 33 in-house investment managers, to support its ongoing activities and investments.

The decision to launch the bond sale comes at a time when corporate bond issuance in Europe is down 16% in the first half of 2022 from 2021, according to Refinitiv data, as central banks interest rates rise and inflation reduces real fixed rate returns. -income assets.

The CCE’s debt scheme, dubbed Project Cranmer, is named after the 16th-century Archbishop of Canterbury Thomas Cranmer, who facilitated Henry VIII’s divorce from Catherine of Aragon and helped lead the English Reformation before until Mary I, Henry’s daughter, orders his execution. .

The CCE expects the bonds to be rated Aa1 by Moody’s, a sign of the organization’s strong credit profile and low risk of default. But investors will need to weigh a number of unique risks before buying the bonds.

These include “a threat or actual separation of the Church of England from the state, particularly where such separation would lead to a dispersion of the issuers’ assets,” according to the bond prospectus.

The CCC has also supported the costs of certain claims against bishops related to failed safeguards for the abuse of children or vulnerable adults in the past. The prospectus warns that the allegations of “historic safeguard failures. . . could in the future increase from the levels currently anticipated”, adding a strain on the finances of the organization.

The Church of England declined to comment further on the project.

In a roadshow to investors, CCE chief executive Gareth Mostyn said the start of the year had been “difficult” in the markets, but the investment fund was “only slightly down” in the first quarter, thanks to a high level. exposure to real assets such as real estate and land and reduced exposure to equity markets. This has helped the organization outperform its peers during the current prolonged period of scorching inflation, the organization said.

“Our slightly lower equity allocation should allow us to outperform in economic environments such as the one we are currently experiencing,” CCE Chief Investment Officer Tom Joy told investors.

The roadshow presentation also highlighted the environmental, social and governance qualities of the bonds – noting CCE’s history of “investing in a manner consistent with Christian values ​​that are closely aligned with ESG best practices”.

Jerry B. Hatch