Bonds & Loans: SPO waiting times double due to boom in labelled bonds

A weekly overview of ESG developments for fixed income

The time it takes to receive a second-party opinion (SPO) from the main providers has doubled in the past few months, according to reports in the International Financial Review. Despite planned increases in staffing levels, the major SPO providers are struggling to keep up with the growth of the sustainable bond market – particularly sustainability-linked bonds, which tend to be more complex and require greater time and resources than use-of-proceeds bonds.

Seafood processing giant Thai Union has raised THB5bn (€128m) from Thailand’s first sustainability-linked bond. The 2.47% 10-year bond received orders of THB8.9bn, including from the Thai Government Pension Fund, prompting Thai Union to increase the issue size by THB1bn from its initial size of THB4bn. The interest rate will rise or fall in 2023 and 2026 in relation to Thai Union’s progress against a number of sustainability targets including a 4% annual reduction in Scope 1 and 2 emissions and remaining in the Dow Jones Sustainability Index Emerging Markets.

Australian beef producer Stockyard Group has signed a sustainability-linked loan of an undisclosed size with Commonwealth Bank. The three-year loan is tied to five ESG metrics, including improved animal welfare and reductions in Scope 1 and 2 emissions.

United States Steel has added sustainability targets to its revolving credit facility as part of a downsize of the facility to $1.75bn. The interest rate is linked to a number of targets including emissions reduction, safety performance and certification of its facilities by ResponsibleSteel. The firm’s subsidiary, Big River Steel, has added the same targets to its $350m revolving credit facility.

Peruvian plastic packaging manufacturer SMI Group has raised $380m from a sustainability-linked bond. The seven-year bond will see its 3.5% coupon increase by 25bp if it fails to meet sustainability targets including increased use of recycled PET by August 2024. 

This week has seen a spate of deals from real estate firms and property developers. Demand for a $600m dual tranche green bond from China’s Ping An Real Estate hit $2.5bn, including $900m from lead managers. Fellow Chinese property developer Jiayuan International Group raised $100m from a 3.5-year green convertible bond, which was three times oversubscribed, to refinance eligible green projects.

In Hong Kong, Road King Infrastructure raised $500m in three-year green notes (5.152%), which saw peak orders of just over $3bn; and Hysan Development Company raised HK$400m (€43.5m) from its debut sustainability bond. The five-year, 1.5% bond will be allocated 80% to social and community projects and 20% to environmental expenditures.

US Real Estate Investment Trust Easterly Government Properties signed a $450m, four-year sustainability-linked revolving credit facility and a $200m five-year term loan. The spread will be decreased by 0.01% if the US-focused REIT achieves undisclosed sustainability targets.

Monarch Private Capital has raised $235m from its inaugural social bond to finance affordable housing projects in the US, while Asia Capital Real Estate has signed a TBH675m (€17.3m) green loan with UOB Thailand to finance a green affordable housing development near Phuket. The UK’s Metropolitan Thames Valley Housing raised £250m from a 15-year sustainable bond with a 1.875% coupon, to build 6,000 green houses – 80% of which will offer affordable rent or shared ownership. MTVH claims it is only the fourth housing association bond to obtain a coupon of under 2%. 

Kenyan real estate investor Acorn Holdings has raised Sh1.438bn (€11.2m) from the final deal of its green bond programme – the first ever in East Africa. The issue saw significant interest from Kenyan pension funds, commercial banks and reinsurance companies, and will be used to fund the development of two green student accommodation blocks. 

Chile has raised $3.75bn from a triple-tranche social bond issue, taking its total labelled bond issuance to $23.75bn – around 24% of total government debt. Meanwhile, Enel Chile has signed a $50m sustainability-linked loan with Santander, with an interest rate linked to its target of reducing its grams of CO2 per KWh generated to 100 by 2023. 

Singapore’s Frasers Logistics and Commercial Trust has issued a S$150m (€93m) sustainability bond. Frasers said that the seven-year, 2.18% bonds, which were three times oversubscribed, are the first ever sustainability bonds in the Singapore dollar market. 

Green munis represented a quarter of US green bond issuance in 2020, but are still only 3% of the overall muni market, according to Morningstar. Many bond-funded infrastructure projects qualify as green expenditure but are not being labeled as such because municipal issuers have limited budgets for framework and auditing costs, and are unlikely to see a greenium large enough to recoup these costs, Morningstar found. 

The European Leveraged Finance Association has partnered with the Loan Market Association on best practice guidance for sustainability-linked leveraged loans. The guidance includes a glossary of common terms, and addresses the selection of KPIs, reporting and loan verification.

Unédic, the French agency in charge of managing unemployment insurance, has raised €2bn from a social bond, with 20% of notes being bought by Asian investors. The agency, which issued €8bn of social bonds in 2020, secured a coupon of 0.01% for the 10-year bonds.

A consortium of pension schemes and insurance companies, including Canada’s Sun Life Assurance Company, has participated in a privately-placed “three-digit million euro” green project bond from Luxcara to build wind farms in Finland. 

US data centre firm Aligned has signed a $250m sustainability-linked loan, increasing its total sustainability-linked debt to $1.25bn. The facility is linked to the firm’s commitment to use 100% renewable energy by 2024, align its ESG reporting with a global standard and halve its workplace-safety incident rate. 

Hungarian car seller AutoWallis has raised HUF6.7bn (€18m) from a 10-year green bond issue with a 2.89% coupon. 

Union Bank of the Philippines has completed a private $150m social bond placement with the IFC. The seven-year bond, the second of its kind in the Philippines, is expected to finance around 2,000 loans to Micro-, Small and Medium-sized Enterprises that have been impacted by the Coronavirus pandemic.

UK utility National Grid’s Emerald Energy Venture has signed a $150m portfolio revolving facility with Sumitomo Mitsui to finance the construction of solar, wind and battery storage projects in the US.

The development bank for the German state of Nordrhein-Westfalen has raised €500m in 0%-interest green bonds, in its second deal of the year. The 10-year bond was three times oversubscribed and 65% was allocated to ‘green investors’. The bank plans to issue a further €5-6bn in green bonds by the end of the year.