Church Commissioners for England bonds given Aa1 rating by Moody’s

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The Church Commissioners for England will, for the first time, raise funds by selling pound denominated bonds in the global capital markets. On 4 July 2022 Moody’s Investors Service issued an Aa1 long-term issuer rating and an Aa1 senior unsecured debt ratings for the forthcoming debt issuances.  The total amount of the bonds have not yet been disclosed.

Moody’s stated the Aa1 ratings were assigned to the bonds in light of the Church Commissioners “very strong financial profile with a lengthy track record of sound investment management, significant autonomy over its distributions to the rest of the Church of England, strong liquidity and minimal leverage, excellent standards of governance and financial strategy and an extremely low likelihood of UK government intervention that would significantly weaken its creditworthiness.”

The Church Commissioners manage £10.1 billion in assets as of financial year end 2021,” with a strong track record of above target returns over the past thirty years,” Moody’s said, adding it has “three years of cash on hand as of FYE2021 and low leverage – spendable cash and investments to total adjusted debt was 6.9x as of FYE2021. Its total adjusted debt includes its duty to fund pension obligations related to the pre-1998 service of Church of England clergy, valued at £1.35 billion as of FYE2021.”

“Despite its role as a funder for the broader Church of England it has autonomy in its distribution strategy, with this autonomy being dictated in legislation. This enables the Church Commissioners to ensure that distributions remain smooth and sustainable over time,” Moody’s said.

The potential liabilities faced by the Church Commissioners, Moody’s reported to investors, was that if parish donations fall, “ this would increase demand on the Church Commissioners’s resources. However, Moody’s considers that the legislative framework for the Church Commissioners, in particular the powers vested in the Assets Committee to determine its sustainable level of distributions, partially insulates the institution from the need to increase donations beyond this level.”

The Church Commissioners “may also be exposed to expenditure related to safeguarding redress,” which will be assessed “under a national redress scheme due to be introduced during the Church Commissioners’s 2023-2025 Triennium.”Proceeds of the sale will be used for general purposes, as well as environmental and social projects, according to Bloomberg. Bloomberg also noted “the bond sale is also unusual because it is coming at a time when other organizations are scraping their debt sales due to market volatility. Corporate pound-bond sales this year are running at about half the pace of 2021.