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Bonds & Loans: L’Oréal issues €1.25bn SLB in first ever bond sale

A weekly overview of ESG developments for fixed income: Carrefour issues €1.5bn SLB, gilt investors ask for green gilt reopening

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Global cosmetics firm L’Oréal has raised €1.25 billion from a sustainability-linked bond, as it made its debut in the bond markets after 103 years of operations. Orders reached a peak of €4.5 billion for the 4.25-year SLB tranche, part of a wider €3 billion deal, before settling at €3.5 billion. French investors took 47 percent of the Aa1/AA-rated notes, with more than half being allocated to asset managers. L’Oréal aims to reach absolute zero scope 1 and 2 emissions at its operated sites, cut scope 1, 2 and 3 emissions per unit sold by 14 percent and use 50 percent recycled or biobased plastics in its packaging, all by 2025. It will pay investors 12.5 basis points per target missed, with a 37.5bps payment if it fails to publish the assurance certificate for its sustainability performance targets.

Supermarket group Carrefour has raised €1.5 billion from its inaugural sustainability-linked bond, with orders reaching around €3.5 billion for both €750 million tranches, a 4.6-year tranche paying 1.875 percent and a 7.6-year tranche paying 2.375 percent. The coupon on both tranches will increase by 25bps at the end of 2025 if the firm fails to meet both its targets – reducing packaging and halving food waste against 2016 levels – with a maximum step-up of 100bps for the longer tranche.

Qatar’s government has confirmed its intention to issue green bonds subject to market conditions, according to reports in Bloomberg.

US natural gas company DCP Midstream has added sustainability metrics to its renewed $1.4 billion revolver. The interest and fees on the facility, which was arranged by Mizuho and JPMorgan, with Mizuho acting as sustainability structuring agent, are linked to progress against the firm’s 2030 30 percent scope 1 and 2 emissions reduction target, and outperforming industry peers on safety.

Gilt investors have welcomed plans by the UK’s debt management office (DMO) to reopen existing green gilts to add liquidity to the market. In a consultation call on Monday, gilt investors told the DMO that there was strong demand for the two green gilts in the secondary market, with some investors expressing a preference for a reopening of the 2053 note this quarter. Investors also called for an auctioned green gilt with an 11-year maturity. The gilt operations calendar will be published on Thursday.

Allied Irish Bank has raised €1 billion from its inaugural social bond. The bank, which has already issued a green bond, saw orders of €2 billion for the six-year deal, which pays a coupon of 2.25 percent, with some bankers involved in the trade estimating a ‘social-greenium’ of around 3-5 basis points. Proceeds will be used to finance loans in the healthcare, education and affordable housing as well as loans to SMEs in socio-economically disadvantaged areas of Ireland, the bank said.

US ethanol giant Green Plains has signed a $350 million sustainability-linked revolver with a group of banks including ING, Bank of America and Fifth Third. ING acted as sustainability structuring agent on the deal, which is linked to environmental and health and safety targets.

E.on has raised €1.5 billion from two green bonds, with a combined order book of €12 billion. The German utility raised €750 million each from a 2.75-year and a nine-year note, which pay coupons of 0.875 percent and 1.625 percent respectively.

Canadian clothing company Gildan has added sustainability targets to its C$1 billion ($800 million; €720 million) revolving credit facility, linking the interest rate to three targets: a 30 percent reduction in scope 1 and 2 emissions by 2030, increased use of recycled and sustainable materials in packaging, and gender parity at the director level or above by 2027.

The central bank of the Philippines has invested $550 million in the Bank for International Settlements’ green bond fund, according to its governor Benjamin Diokno. Speaking at an event last week, Diokno said the central bank first invested $150 million in 2019 shortly after the fund launched, and has plans to make further investments.

Telecoms firm Spark New Zealand has raised NZ$100 million ($70 million; €63 million) from a 6.5-year sustainability-linked bond. The bond pays a coupon of 4.37 percent, which will be subject to a step up from 2026 if the firm fails to reduce its scope 1 and 2 emissions by 56 percent against a 2020 baseline.

US supermarket chain Sprouts Farmers Market has signed a $700 million sustainability-linked revolver. The interest rate on the five-year facility is linked to two targets: board diversity and sales of social and environmentally sustainable products.

Finnish real estate firm Kojamo has raised €300 million from its second green bond. The four-year notes carry a coupon of 2 percent, with proceeds allocated to eligible categories including energy efficiency, renewables and clean transport.

In other Nordic news, Swedish municipal funding agency Kommuninvest has raised €500 million from its 15th green bond. Interest for the seven-year note reached €1.8 billion, leading it to price at 4bps below mid swaps.

Czech utility Čez has begun investor calls for a debut sustainability-linked bond, but has pledged not to use the proceeds for its coal business amid investor uncertainty. The interest rate on the bond will be linked to the utility’s scope 1 emissions intensity, where the firm is targeting a 30.8 percent reduction from 2019 to 2025 and a 57.4 percent reduction by 2030.

The Nordic Investment Bank has made a $50 million sustainability-linked loan to chemicals firm Borregaard to finance investments in emission and water effluent reduction. The interest rate on the loan is linked to SBTi-approved scope 1 and 2 targets, reduced emissions of organic compounds into the Glomma River and reduction in recordable injuries.