Bonds & Loans: US sees biggest corporate green bond from non-financial

A weekly overview of ESG developments for fixed income

US retailer Walmart has raised $2bn from its inaugural green bond as part of a multi-tranche $7bn financing raise. According to reports, the interest rate on the 10-year notes – the largest ever by a US non-financial corporation – was 50bp above the Treasury benchmark. Proceeds will be spent on projects including renewables, energy efficient refrigeration and electric vehicles. Telecommunications giant Verizon also announced that it has raised $1bn from a 20-year green bond,its third, which it said it expects to allocate entirely to renewable energy projects. 

Elsewhere in the US, energy firm the Tennessee Valley Authority secured its lowest ever 10-year coupon, after issuing a 1.5% green bond. There was more than $2bn of demand for the $500m deal, which will finance renewables and energy storage projects. And US-based Graphic Packaging International has issued a 50-year green bond. The $100m, 4% deal will support the firm’s “cardboard platform optimisation project”, which includes the installation of a cardboard recycling facility at its mill in Michigan.

Real Estate Investment Trusts are also tapping the market, with research from S&P Global showing that 16.4% ($7.17bn) of capital raised by the industry so far this year has been in green bonds. 

Packaging company Smurfit Kappa has begun marketing for its debut green bond – a €1bn dual tranche offering with eight and 12-year maturities. Proceeds will finance circular economy-related packaging projects and sustainable wood, pulp and paper sourcing.

Deutsche Bank has completed its first ever green repo transaction, transferring securities to M&G in exchange for cash which will be spent under its green financing framework. The size of the deal was not disclosed.

More sovereign issuers are entering the market too, with the Serbian government adopting a green bond framework last week. The country’s Ministry of Finance said a deal would broaden its investor base, but has not published details of the framework or its second-party opinion. Meanwhile Indonesia has raised €500m from a 12-year SDG bond, its first ever euro-denominated paper. The Indonesian Ministry of Finance said that there was high demand, but did not disclose the size of the orderbook for the bonds, which launched with a yield of 1.351%.

The UK’s inaugural green gilt will pay a coupon of 0.875%, the Debt Management Office has said. The syndicated launch is planned to take place sometime next week. 

Germany has raised €3.5bn from a 0% 10-year green bond auction. The new issuance did not see the high levels of demand that the previous 30-year transaction had done, with just €3.658bn in bids from primary dealers.

US pharmaceutical company Lilly has raised €600m from its first sustainability bond. The 0.5%, 12-year notes will be used to improve workforce and supplier diversity, increase access to healthcare and medicine, reduce waste and water emissions and improve energy efficiency.

Turkish bank Vakifbank has raised $500m from a sustainability bond after the order book hit $2.5bn from more than 140 investors. The 5.5%, five-year notes will be used to support borrowers generating more than 90% of their revenue from renewables, pollution prevention and control, green buildings, affordable housing and employment generation.

The finance committee of India’s JSN Steel is due to meet today (September 15) to decide the terms of a planned $1bn sustainability-linked bond,according to a filing with the Securities and Exchange Board of India. A roadshow took place this week ahead of a transaction that will see the firm commit to 23% emissions reductions per tonne of steel by the end of the decade. The bond has a second-party opinion from DNV. 

Brazilian car rental company Movida has raised $300m from the latest tap of its 10-year sustainability-linked bond, launched in January. The 5.25% notes take the total borrowed to $800m, with a 25bp step-up should Movida fail to meet the 2025 interim target for its goal of cutting emissions by 30% by 2030.

Brazilian paper producer Suzano has raised $500m from its third sustainability-linked bond, which was seven times oversubscribed. The 2.7% notes, maturing in 2028, are linked to reductions in industrial water usage and an increased percentage of women in leadership positions, with a 25bp step-up should Suzano fail to meet its targets.

Brazilian stock exchange operator B3 is roadshowing a sustainability-linked bond tied to a pledge to increase female leadership to 35% by the end of 2026, and create a diversity index by the end of 2024. 

A quarter of US sustainability-linked loans have no penalties and only a 1bp discount if ESG targets are met, according to analysis by Bloomberg. Of the loans where the interest rate adjustments were disclosed, 5bp penalties and bonuses were the most common adjustment, followed by 1bp, the analysis found.

Australian data centre firm AirTrunk has added sustainability targets to an outstanding A$2.1bn (€1.4bn) corporate loan, due in 2023. The interest rate will now be linked to an industry-standard indicator used to measure energy efficiency of data centres.

German agricultural giant BayWa has replaced a number of loan facilities with a €1.7bn sustainability-linked syndicated loan. The three-year deal is linked to the firm's MSCI ESG rating, which currently stands at AA, with the highest achievable rating being AAA.

UK student housing provider Unite Group has signed a £450m sustainability-linked loan with HSBC, NatWest and RBC. The interest rate on the 3.5-year loan will increase or decrease by 2.5bp depending on the provider’s performance against three targets: the reduction of Scope 1 and 2 emissions against its Net Zero-by-2030 target, improved energy efficiency ratings for its housing stock, and its contributions to higher education access. Unite said that all future loans would be sustainability-linked, and that any margin savings would be donated to charities that benefit young people.

Union Bank of India has signed a $1.5bn sustainability-linked loan with a syndicate of lenders. The interest rate on the loan is linked to a reduction in the bank’s greenhouse gas emissions, its responsible sourcing of metals, and growth in its renewable power portfolio.

UK housing association Home Group has signed a £125m sustainability-linked loan with Lloyds Bank. The interest rate on the revolving credit facility is linked to a number of targets including improving the energy efficiency of its housing stock, building new energy efficiency homes and increasing the number of apprenticeships it offers.