We were mandated by Pennon, parent company to waste management and renewable energy business Viridor and regulated water utility South West Water (SWW), to raise unsecured debt to fund the expansion of Viridor. SWW funded itself independently in the public bond market but Viridor was hitherto funded through shareholder loans and unsecured bank debt raised by Pennon at Group level.

As a holding company, Pennon’s cashflow consists of the dividends paid by both subsidiaries and their debt is structurally subordinated to the debt raised by SWW. However at 62% their leverage at the holdco was low compared to companies that have implemented a Whole Business Securitisation and our unique added value was getting potential lenders on board with that.

We raised £125 million of 17 year funding  for Pennon which was provided by a single UK Insurance Company.  At Pennon’s request, the transaction was documented as a loan. The tight pricing of the loan reflected the relatively modest gearing of Pennon and the strong dividend generation by SWW as well as Viridor.