Social bond of the year - US muni bond: Equitable School Revolving Fund (ESRF)

Anand KesavanEstablished to reduce funding costs for high-performing charter schools in the US, the Equitable School Revolving Fund (ESRF) brings together private philanthropic grant funding with bond proceeds. This structure allows the schools to save money on their facilities expenses by borrowing from ESRF, which through the over-collateralization is able to make below-market rate loans.

This $170.8 million bond is the middle raise in a predicted series of three, the first in 2019 and the final one expected later this year. It is split into two, the 2020A series is worth $122.7 million with the Arizona Industrial Development Authority as the conduit issuer, whereas the 2020B series is worth $48.1 million with the California Infrastructure and Economic Development Bank as the conduit issuer.

The bond will be used to finance or reimburse ESRF for the cost of financing charter school loans to qualifying public charter schools. Those costs included the acquisition, construction, improvement, equipping and furnishing of certain school facilities.

Across those three series the ESRF is expected to raise $500 million, as it becomes the first municipal borrower to establish a pooled, revolving loan fund using private, philanthropic monies to provide program over-collateralization and credit strength.

"ESRF is thrilled to receive Environmental Finance's Social bond of the Year award. Today, more than ever, investors are seeking innovative opportunities to diversify their impact, promote social and racial equity, and receive a fair rate of return.  ESRF does just that by providing access to scalable social investments resulting in more equitable education opportunities for students across America," said Anand Kesavan, ESRF founder & CEO.

Deal Highlights

Issuer: Equitable School Revolving Fund (ESRF) through the Arizona Industrial Development Authority and the California Infrastructure & Economic Development Bank
Size: $170.8 million
Maturity: 1 November 2021-2040, 2045, 2050 & 2055
Coupon: 5% and 4%
Use of Proceeds: Low-cost, long-term, fixed-rate loans to high-performing public charter schools in predominantly low-income communities.
External Review: Kestrel Verifiers
Lead Managers: RBC Capital Markets
Credit rating: S&P (A)