Bond, Pants Bond: Pants To Poverty Launches Groundbreaking Financial Instrument to Fuel Growth and Tackle Poverty
01 December 2010
LONDON, 1 December 2010 - Pants to Poverty, one of the UK’s fastest growing social enterprises, will launch a revolutionary new 'pants bond' that will provide the working capital to fuel its growth as a champion of ethical fashion.
The Pants Bond, which will be launched to potential high net worth investors at The Gherkin on December 1, has been developed by leading UK companies including private bank Coutts & Co., accountancy firm Smith & Williamson and international legal practice Hogan Lovells. The bond was created by Hogan Lovells pro bono to fund Pants to Poverty’s working capital requirements for the foreseeable future.
Pants to Poverty aims to raise £250,000 through the Pants Bond, with each bond of £2,500 bearing interest payable in wonderful fair-trade, organic pants and a donation to a related social enterprise foundation. The funds raised by the bond issue will be used to accelerate the growth of Pants to Poverty as one of the fastest growing ethical and Fairtrade fashion brands in the UK today. All funds raised will be used to fund working capital and thus help grow the business.
Ben Ramsden, founder of Pants to Poverty, says: “We have maintained high growth year-on-year since our launch in 2005 and predict another 100 per cent increase in sales for 2011 but it has been extremely difficult to find affordable funding to support our growth. We needed to find a creative solution and found an outstanding set of partners who have helped develop this unique financial instrument that will create meaningful social returns for our bond holders.”
Andrew Carey, a partner at Hogan Lovells who was responsible for the innovative structuring of the bond, said:
“This is truly a unique financial instrument, which allows for part of the interest to be payable in kind - literally by the delivery of pants! This is a nice way of rewarding contributors with a fun and original form of return and one which ensures they get to sample the latest products of the company. We hope this will help encourage further growth in the social enterprise sector."
For each £2,500 of bonds that investors hold they will receive products from the Pants to Poverty range annually. The cash element will be paid to the Pi Foundation, an organisation set up by Pants to Poverty to promote enterprises and systems that encourage fair trade flow across the value chain.
Yasmin Waljee, International Pro Bono Manager at Hogan Lovells added:
“There is growing interest in the development of the financial instruments and that help social enterprises raise capital particularly social investment bonds. For us this is a good way to apply our experience in finance to new contexts to achieve a greater impact in addressing issues of global poverty. This is a significant project for us to be involved with, and embodies the nature of our pro bono work."
Pants to Poverty was established as part of the Make Poverty History Campaign to develop a new business model for fashion. Now, with an agent and distributor network covering 10 core markets, the business is poised to launch with leading department stores across the UK, Germany, Austria, Switzerland, Sweden and Norway in early 2011. These will be followed by Australia and Japan for Christmas 2011.
The official launch event at The Gherkin on December 1 will see a catwalk fashion show of Pants to Poverty’s unique line of underwear.
Structure of the Pants Bond:
Details of the Pants Bond are as follows:
- 10 year loan note
- Par value of £2,500
- Total issue of £250,000
- Transferable after a minimum hold of six month (with a three month notification period)
- Annual Coupon rate paid at 8.65 per cent
The interest of 8.65 per cent will be paid in quarterly instalments consisting of:
§ 12 pairs of Fairtrade and Organic underwear (inclusive of delivery)
§ £21.63 paid in cash to offset tax at source
§ £50 donation to the Pi Foundation, a charity set up by Pants to Poverty to help develop sustainable business models in the fashion industry
- Ends -
NOTES TO EDITORS
About Pants to Poverty
Pants to Poverty (www.pantstopoverty.com) is a leading British Fairtrade and Organic underwear brand established in 2005 as part of the Make Poverty History Campaign to develop a new business model for fashion.
· Sourcing: The cotton is sourced directly from fair-trade and organic cotton farmers in India and Pants to Poverty has developed a relationship with farmers in Vidharba, Maharashtra – an area notorious for terrible suicide rates of circa seven a day for the past 15 years. By working with partners in India, two years ago Pants to Poverty set up a business unit owned by the farmers to produce the world’s first child labour free organic and fair-trade cotton. Working capital has meant that they have not been able to source directly from these fields but the bond issue will enable that ensuring this pioneering project and the farmers will have access to market and prove the business model for this cotton-seed business unit. These farmers are able to triple their profits, farm totally naturally and invest in their own communities and in biodiversity to sustain themselves for years to come, all enabled through trade without aid.
· Production: Working closely with factory and civil society partners, Pants to Poverty has developed a real living wage and freedom of association framework that is ready to be rolled out based on open costing, mutual trust and driving efficiencies through industrial engineering all the way along the value chain. This will be the first time that the model has been implemented and will act as a catalyst for others in the fair-trade movement and beyond to adopt the model.
· Donations to Pi Foundation: Beyond the work of Pants to Poverty, interest will be donated to cover the core costs of to programmes already initiated within Pants’ value chain community. The first project is the cotton-seed trading business unit which puts ownership of the cotton seeds firmly in the hands of the farmers whilst sending their children to school. Approximately 500,000 children in India alone are engaged in forced child labour in cotton seed production and this provides a viable model for its eradication. The second project is a youth employment programme in the UK working in partnership with the YMCA offering training, support and qualifications to young hostel members so they can become gainfully employed. Participants are trained to sell Pants products and run a small business unit with profits generating a fair-trade premium for them to invest in skills development. The programme will launch to the public in March 2011.
· Pants, and expanding the Pi: Pants to Poverty is the founding company of Pi group. A nascent group of companies that, once the model is proven for Pants, will be able to roll out similar programmes across all the core commodities of the slave trade. Plans have been developed for rubber and sugar, which, will be in a position to be rolled out once Pants has met its 2011 expansion plans.