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Bonds and Loans: Colombia issues inaugural green bond while UK gears up for second green gilt

A weekly overview of ESG developments for fixed income

Colombia upsized its inaugural green bond raise by 50% on the back of a 4.6x oversubscription, securing what it estimated was a 7bp greenium. The country had initially planned to raise Ps500bn (€113m) , but raised this to Ps750bn after receiving Ps2.3tn in orders for the 10-year bond, which launched with a coupon of 7.63%. 

In other sovereign news, the UK’s second green gilt will be issued in the week beginning October 18th, the Debt Management Office has said. The gilt will mature in 2053, and is expected to raise £5bn. The coupon and syndicate for the deal will be announced later. Korea is also planning to issue a euro-denominated green bond, which Fitch has rated as AA-. Meanwhile, Hungary halved its 30-year green bond offering to HUF10bn (€27m) off the back of weak demand, with just HUF12.2bn in primary dealer bids, according to reports in the Budapest Business Journal.

Ford has added sustainability metrics to its $15.5bn revolving credit refinancing, in the largest sustainability-linked loan ever. The 5-year $10.1bn facility, 3-year $3.4bn facility and 3-year $2bn facility were signed with a group of 60 banks, with JP Morgan Chase acting as lead bookrunner. The interest rate on the facilities is tied to GHG emission reductions from Ford’s manufacturing plants, an increase in renewable electricity used by the plants and reductions in tailpipe emissions from Ford vehicles in Europe.

Philip Morris International has signed a $2.5bn ‘business transformation-linked’ revolving credit facility. The interest rate on the 5-year facility is tied to the percentage of PMI’s revenue which comes from smoke-free products and the number of markets where it sells smoke-free products.

Chinese companies issued $44bn in green bonds last year, with $139bn in outstanding domestic green bonds, according to a new report by the Climate Bonds Initiative. While issuance slowed in the first half of 2020, it picked up again in the second half of the year, leaving China the second largest single-country market for green bonds after the US, although only the fourth largest issuer of green bonds aligned with the Climate Bonds Initiative’s definition of green.

Japan's Nippon Telegraph and Telephone plans to raise ¥300bn (€2.32bn) in green bonds, according to reports in Nikkei Asia. The bond, which will be the largest single green bond issue by a Japanese company, will be issued in three tranches, with maturities of three, five and ten years. Nomura and Mizuho will serve as lead managers.

The Arab Petroleum Investment Corporation has raised $750m from its inaugural green bond. The coupon on the 5-year notes was 1.483%, with $2.1bn of bids from 83 investors, with a 7% allocation to investors in the Middle East. Eligible categories of investment include  climate mitigation and adaptation, the transition to a circular economy, pollution prevention and control and biodiversity preservation.

Swedish telecommunications firm Ericsson has added sustainability targets to its renewed $2bn revolving credit facility. The interest rate on the 5-year facility, signed with a group of 18 banks, is linked to Ericsson’s 2030 Net Zero goal and an increase in suppliers setting 1.5C-aligned targets.

ING, which signed the first sustainability-linked loan in 2017, said that it had concerns about the credibility of the sustainability-linked loan and bond market. It said sustainability KPIs must address a company’s material sustainability issues, be ambitious and verified by an independent party where possible, with both borrowers and lenders sharing the responsibility to maintain market integrity. It also cautioned against structures where discounts or premiums are donated to charity, saying that donating premiums to compensate for higher credit risk was misaligned with banks business models and that donation reporting is often not transparent. 

The Inter-American Development Bank (IDB) has made a $50m loan to El Salvador to allow it to offer loans for the purchase of affordable housing. The IDB said that the loan, which has an interest rate linked to LIBOR, is expected to benefit around 2,500 households. Meanwhile, IDB Invest, IDB’s private sector arm, has placed a A$68m (€43m) ‘decarbonisation bond’ with Sumitomo Life Insurance. Proceeds from the 10-year, 1.749% bond will be used to support green private sector projects. 

Finnish financial institution MuniFin has issued a €500m tap for its 2035 0.05% social bond, which saw an orderbook of €1.8bn. MuniFin said that it saw a ‘social premium’ of 2bp, with 75% of the bonds placed with ESG investors. 

80% of social bond proceeds since 2014 have been allocated to access to essential services, employment generation and socioeconomic advancement, according to a new report by Moody’s. While the market is growing quickly, with H1 2021 issuance up 187% from the same period in 2020, reporting and disclosure practices “remain immature” compared to those of green bonds, although continuing market and regulatory initiatives including the proposed EU social taxonomy are expected to help improve best practice.

Semiconductor firm Analog Devices has raised $750m from its inaugural sustainability-linked bond. The interest rate on the 7-year bond is tied to the firm’s aim of reducing its scope 1 and 2 emissions by 27% by 2025.

Earth Security and HSBC Australia have partnered to launch a ‘municipal mangrove bond’ programme, which would see Australian cities issue bonds to fund the planting of mangrove forests to protect against flooding. Earth Security has previously suggested that savings from reduced insurance premiums resulting from investment in flood protection infrastructure could help fund the coupons on these bonds.

Costa Rican government-owned electricity and telecommunications provider Instituto Costarricense de Electricidad has raised $300m from a sustainability-linked bond. The coupon on the 10-year bonds was set at 6.875% off orders of $825m, and will be increased by 25bp if ICE has not implemented 502,000 electricity smart meters by the end of 2025. Proceeds will be used to refinance a portion of ICE’s $500m 6.95% notes, due this year.

Chilean energy platform GM Holdings has signed a $980m project finance deal with Crédit Agricole, to finance the construction of a 480MW solar plant and the conversion of a 132MW diesel-fired power plant to natural gas. 

Maritime transportation firm Safe Bulkers has signed a $60m 5-year sustainability-linked loan, split into a term loan and revolving credit facility of $30m each. The interest rate on the loan, which is secured against five vessels, will be discounted if Safe Bulkers hits undisclosed emissions targets. Proceeds will be used to refinance pre-existing loans.

Japanese REIT United Urban Investment Corporation has announced its intention to issue a sustainability bond. Meanwhile, fellow REIT W.P. Carey has raised $350m from a green bond. The 11-year notes pay a coupon of 2.45%.

Thailand’s SCG Packaging has taken out a $148m loan with Bank Ayudhya. The interest rate on the loan is tied to GHG emission reductions, water management and increasing the overall sales proportion of its green products.

Woolworths has raised A$700m (€439m) from a dual tranche sustainability-linked bond. The interest rate on the bond, which was split into an A$350m 1.85% 6-year tranche and A$350m 2.75% 10-year tranche, is linked to interim targets for the group’s 2030 emissions reduction goal, with measurement points in 2025 and 2029 respectively. Proceeds from the notes will be used for general corporate purposes, Woolworths said.

French industrial group Legrand has raised €600m from its inaugural sustainability-linked bond. The interest rate on the 10-year 0.375% notes, which Legrand said were “significantly oversubscribed” is linked to the firm’s 2030 emissions reduction targets. 

Finnish mining and metals tech firm Metso Outotec has agreed to add sustainability targets to its €600m revolving credit facility. The interest rate on the facility, which matures in 2026, is linked to operational and logistical CO2 emissions and the number of suppliers which have set a science-based emissions reduction target.

The World Bank has raised A$274m (€171m) and NZ$241m (€143m)  from a private green bond placement with a group of Japanese life insurance companies. Dai-ichi, Fukoku Mutual, Nippon and Sumitomo bought the bonds, which both have a tenor of 15 years, and pay coupons of 1.78% for the AUD issue and 2.41% for the NZD.

German lending platform Auxmoney has sold a €250m asset backed security. The proceeds of the issuance, which is made up of around 30,000 loans, will be used to provide finance to people underserved by traditional banks, Auxmoney said.

Nordic healthcare and safety services firm Falck has added sustainability targets to its €500m funding facility, signed with a syndicate of five banks. The interest rate on the loan is tied to the firm’s CO2 emissions targets, employee engagement and lost time injury rate. 

Infrastructure firm Elecnor has added sustainability targets to its restructured €350m financing, which was subscribed to by a syndicate of lenders, including Barclays, BBVA and Santander. The firm, which did not disclose any of the targets attached to the deal, also borrowed €50m as a sustainable loan, €20m as a green loan, both with a 10-year term, and €30m from sustainable bonds with a 14-year maturity.

Hotel developer and operator Vinpearl JSC has raised $425m from an exchangeable sustainable bond. The 5-year bond, which has a coupon of 3.25%, was upsized from $400m after 40 investors expressed interest. Eligible categories under Vinpearl’s framework include green buildings, affordable housing and access to healthcare.

Spanish renewables firm ACCIONA Energía has raised €500m from its inaugural green bond issue. The 6-year bond was five times oversubscribed, launching with a coupon of 0.375%. Meanwhile, Portland General Electric has raised $150m from a green bond which was six times oversubscribed. The firm plans to use the proceeds to refinance its investment in a 380MW wind and solar facility in Oregon.

Singapore-based property developer UOL Group has signed a S$540m (€343m) sustainability-linked loan with DBS Bank, United Overseas Bank and Oversea-Chinese Banking Corporation. The exact interest rate on the loan was not disclosed, but is tied to the Singapore Overnight Rate Average. It will be reduced if UOL meets emissions, energy and water intensity reduction targets for its commercial properties.

Toyota’s Singapore subsidiary has signed an S$150m (€95.3m) sustainability-linked revolving credit facility with DBS Bank. The sustainability performance targets attached to the loan were not disclosed, but Toyota said the proceeds will be used to grow its electric vehicle business in the country.

Chemicals firm Itelyum has raised €450m from a sustainability-linked bond, which was “multiple times” oversubscribed. The 5-year 4.625% bond will be used to finance the buyout of the Itelyum Group and the firm’s growth strategy. The KPIs attached to the bond were not disclosed.

Energy firm Sembcorp has raised S$675 (€429m) from a sustainability-linked bond, with an anchor investment of S$150m from the International Finance Corporation. The 10.5-year bond launched with a coupon of 2.66%, which will increase by 25bp if Sembcorp fails to reduce its emissions intensity to 0.4 tonnes of CO2 per megawatt hour by the end of 2025.