On 28 May 2020, Pearson returned to the bonds market with a pioneering offering: a £350m, 10-year Education Bond.
In line with the firm’s newly established Social Bond Framework, the offering was designed to support a set of specially targeted company projects and initiatives with its use-of-proceeds plan – reflecting Pearson’s transformation into a pure-play learning company.
In March 2019, Pearson had become the first-ever business to link the margin on its revolving credit facility to a commitment to UN Sustainable Development Goal 4 (SDG 4): Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all.
Pearson devoted significant time to crafting its Social Bond Framework to issue Education Bonds in line with the Social Bond Principles set down by the International Capital Markets Association (ICMA). Use of proceeds would focus on access to education and socioeconomic development, with eligible projects targeting underserved learners and communities – particularly through provision of high-quality online learning benefitting those who are unable to attend schooling in person.
Pearson’s treasury team set up a working group including sustainability and investor relations teams and finance staff to examine crossovers between the firm’s most socially inclusive business lines and those that required investment.
Above all, Pearson was determined that the subsequent issue would be highly credible, clearly demonstrating how expenditure would meet SDG 4. As such, the framework was drawn up to satisfy ICMA’s ‘best in class’ social bond requirements, with a second-party opinion provided by Vigeo Eiris.
Prior to the transaction launch, Pearson conducted a couple of days of investor calls, placing particular emphasis on the story of the firm’s transformation into a learning company and the social ethos that underpinned that journey. Initially, the company kept its options open to issuing the bond in either euros or sterling, but opted for the latter in light of its currency need, together with tighter pricing and access to a longer duration.
After launch, the order book underwent rapid growth to £3.7bn – oversubscribed by more than 10 times – an exceptional response given market conditions at the time. Pricing tightened by 0.45% between launch and final pricing.
The transaction is believed to be the first social bond focused solely on education.
“The timing was good, the social piece was key to the bond, and the marketing and execution were brilliant.”
Provider: HSBC, Barclays and Merrill Lynch International
Structure: Single-tranche social bond of £350m, with a maturity of 10 years.