L&Q Housing Trust SLB ‘builds’ in a coupon step-up

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On March 20, London & Quadrant Housing Trust announced it had missed one of three Sustainability Performance Targets (SPTs) linked to its outstanding £300m Sustainability-Linked Bond.

By falling short of its target to reduce Scope 1 and 2 emissions by 20%, the Trust will have to pay an additional 12.5bps on each bond coupon, starting in September this year.

The SLB, issued in June 2022, matures in March 2032. This means the higher coupon will be paid for most of the bond’s tenor. While the step-up should result in a spread tightening of 12bps, the SLB is currently priced flat to a longer dated vanilla bond, suggesting the market has yet to price in the step-up.

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