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IPE special report May 2018

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Wellcome Trust prices £400m bond with maturity of 45 years

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The Wellcome Trust – the UK’s largest charitable foundation, with an endowment of £16.5bn (€20.2bn) – has priced £400m worth of bonds with a maturity of 45 years, falling due in 2059.

The issue is priced at a spread over Gilts of 58 basis points.

Wellcome said it believed this was the tightest spread for a non-government related issuer in the sterling market since the financial crisis of 2008.

It said it also believed the implied nominal coupon of 4% was the lowest for a non-government related issuer in the sterling market for a bond with a maturity in excess of 40 years.

The initial order book was more than three-and-a-half times oversubscribed.

JP Morgan and Morgan Stanley acted as joint lead managers of the issue, with Bank of America Merrill Lynch, Deutsche Bank and Goldman Sachs acting as co-managers.

Wellcome spends more than £750m each year on its mission of improving human and animal health, largely through funding biomedical research and its translation into healthcare.

The trust’s investments have returned a total of £7bn (57% cumulative, 9% annualised) in the five years to end-September 2013, recording positive returns in each of the five years.

Annualised returns over 10 and 20 years have been 10%.

Wellcome is currently rated Aaa (stable) by Moody’s, and AAA (stable) by Standard & Poor’s and said it was its policy to maintain these ratings.

Wellcome issued two previous bonds, in 2006 and 2009, the first UK charity to do so.

Danny Truell, CIO at Wellcome Trust, said: “We are delighted at the continued strong investor interest in us and the strength of our portfolio.

“It has been our widely publicised strategy to regularly review market conditions and to access the bond markets when circumstances are appropriate.”

He added: “We understand that not many issuers are granted the opportunity to borrow money for this long, particularly at the cost of funding we have secured.

“It is testament to the strength of our financial position that we have seen such strong demand for this bond and are grateful to the many institutions who intend to entrust us with their money.”

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