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Bonds & Loans: Sustainability-linked loan for liquefied petroleum gas carriers

A weekly overview of ESG developments for fixed income

Bermuda-based Avance Gas has secured a $104m sustainability-linked loan to finance two liquefied petroleum gas carriers being built in South Korea from an unnamed syndicate of banks. The loan will mature either in June 2027 or five years after the second ship is delivered – whichever date is earliest. The interest rate will be adjusted annually based on Avance’s progress against carbon intensity targets set out in the ‘Poseidon Principles’ for the shipping industry. 

The North American sustainable debt market reached $311bn at the end of Q1 2021, with the US seeing a year-on-year growth of 72% from 2016 to 2020, according to the latest research from the Climate Bonds Initiative. The vast majority of sustainable debt in North America is green, with $271bn of green bonds issued since 2011 – dominated by green mortgage-backed securities from Fannie Mae and green munis. While social bonds are still in their infancy ($15.5bn), the report says that the Biden Administration’s emphasis on addressing social inequalities could lead to further development in the space.

Benin has announced plans to issue a euro-denominated SDG bond next week, marking the first sustainable sovereign bond out of sub-saharan Africa. It comes as Uzbekistan issues a sovereign SDG bond this week. 

Quintet Bank has seeded two corporate green bond ETFs from DWS. The funds track Euro and USD versions of the Barclays Bloomberg green bond indices, which cover investment grade deals from issuers that satisfy criteria relating to MSCI ESG ratings and controversies filters. 

Italy’s Banca Popolare di Sondrio has raised €500m from its inaugural green bond offering. The six-year notes have a coupon of 1.25% on an orderbook of €700m. €406m of the proceeds will refinance existing assets – mostly in the green buildings and renewables categories – with the remainder allocated to projects including pollution prevention and control and clean transportation.

NN Investment Partners’ green bond funds have hit the €4bn market five years after the first strategy was launched. The Dutch asset manager said that increasing sector diversification and awareness of the performance benefits of green bonds were driving investor interest in the market.

Investec has raised $600m from a sustainability-linked syndicated loan. The Anglo-South African bank initially sought $450m but increased the deal on the back of demand from a consortium of 33 banks including Bank of America, Lloyds, Mizuho and Standard Chartered. The interest rate on the loan will rise or fall if Investec meets or misses set sustainability targets.

Global real estate investment trust Realty Income has raised £750m from its debut green bond offering. The dual tranche issuance saw £400m raised from six-year 1.125% notes and £350m raised from 1.75% 12-year notes. Eligible projects include the acquisition or construction of energy efficient buildings, electric vehicle infrastructure and the installation of renewable energy systems.

Budweiser APAC, a subsidiary of Anheuser-Busch InBev, has signed a three-year, $500m sustainability-linked revolving credit facility with a consortium of banks. The interest rate is linked to the firm's progress in achieving carbon-neutrality in its Wuhan brewery, using 100% recycled materials in its packaging, improving water availability and quality in disadvantaged communities and supporting farmers.

Swedish commercial property firm Kungsleden has signed a SEK2.9bn (€285m) sustainability-linked credit facility with Handelsbanken. The four-year, mortgage-backed facility is linked to undisclosed diversity targets and a 25% reduction in property CO2 emissions by 2025.

Water infrastructure firm Blackbuck Resources has signed a $50m sustainability-linked loan with dedicated energy and power credit fund Riverstone Credit. The loan is linked to undisclosed “sustainability targets, which are defined by KPIs set internally by Blackbuck”.

Greece’s largest energy producer, Public Power Corporation, has announced plans to issue €350m in sustainability-linked bonds. The firm raised €500m from a similar deal in March, with a 50bp coupon step up if it fails to meet its 2022 target of a 40% cut in emissions.

Italian utility A2A has raised €500m from its inaugural sustainability-linked bond. The orderbook for the 10-year bond was 2.8 times oversubscribed, leading to a coupon of 0.625% for the notes – the lowest ever achieved by the company. If A2A has not reduced its Scope 1 emissions to 296 grams of CO2 per kilowatt hour by 2025, the coupon will be increased by 25bp.