Bonds & Loans: Net Zero banks fund $13.4bn Aramco pipeline acquisition deal

A weekly overview of ESG developments for fixed income: Trafigura signs $5.295bn sustainability-linked revolver, Germany to raise up to €15bn in 2022


A group of 19 banks including JP Morgan, HSBC, BNP Paribas, Standard Chartered, Societe Generale, Credit Agricole, Citibank and Mizuho – all members of the Net Zero Banking Alliance – have signed a $13.4 billion loan with a consortium led by BlackRock to fund the purchase of a 49% stake in Saudi Aramco’s gas pipeline network, according to reports in Bloomberg. The purchase, reportedly worth $15.5 billion, will see BlackRock and a number of other investors including China Merchants Capital and Keppel Infrastructure Trust acquire the equity. In April last year, Aramco signed a similar deal for its oil pipelines, raising $12.4 billion. 

The Asia Pacific Loan Market Association, Loan Market Association, and Loan Syndications and Trading Association have issued new advice to sustainability-linked loan issuers on the use of external reviews. The advice contains minimum expectations for external reviews of labelled loans, recommends that issuers obtain external reviews prior to issuance, and that these should also be made public if possible. 

Global commodities trader Trafigura has upsized its refinanced sustainability-linked revolving credit facilities to $5.295 billion following significant oversubscription. The group had initially looked to sign a $4.5 billion facility, but substantial interest from a total of 55 lenders led it to upsize. The interest rate on the revolver, split into a $2.025 billion 1-year tranche and a $3.270 billion 3-year tranche, is linked to four KPIs: reductions in scope 1 and 2 emissions, responsible metals sourcing, growth in renewable power capacity and implementation of the Voluntary Principles on Security and Human Rights. 

Chile has become the first sovereign to issue a sustainability-linked bond, raising $2bn from a 20-year bond linked to two environmental targets. Orders for the bond reached $8.1bn, leading it to price at 4.346%, 200bp over US treasuries. The targets require Chile to reduce its absolute emissions to 95m tonnes of CO2 by the end of the decade – from 112.3m in 2018 – and its carbon budget for the current decade must not exceed 1,100m tonnes. Half the country’s electricity generation must come from renewables by 2028, and 60% by 2032 under the terms. Chile will pay an extra 12.5bp per target missed.   

Canada has published its green bond framework ahead of a debut C$5 billion (€3.5 billion) deal this fiscal year. The framework received a second-party opinion from Sustainalytics, which affirmed its alignment with the Green Bond Principles. Every category of expenditure apart from green buildings is included in the framework as eligible. In other sovereign news, Germany’s Finanzagentur said it plans to raise more money from green bonds in 2022 than it did in 2021. A formal target has not been set, but the country could raise up to €15 billion this year, with a new October 2027 green bond scheduled for June 28th as well as syndicated and auctioned taps.

Hong Kong’s Link Asset Management has signed a HK$12 billion (€1.4 billion) sustainability-linked loan with 16 banks including DBS, HSBC, ICBC and Bank of China for its Real Estate Investment Trust. The interest rate on the four-tranche loan, the largest signed to date by an Asian REIT, is linked to a number of targets including engaging tenants on green leases, promoting social mobility through employment and upgrading the manager’s net zero strategy to be in line with the Science-Based Targets Initiative. 

The Swedish City of Helsingborg has raised SEK500 million (€46.3m) from its second sustainability-linked bond. The city, the first government issuer to raise money from an SLB, placed the 4-year 0.87% bond with a single unnamed investor through SEB. The coupon is linked to a single target: cutting of emissions in the city by 62% against a 1990 baseline by 2025. 

In the US muni market, the Arizona Industrial Development Authority has raised $200 million from one of the largest sustainability-linked bonds on the market. The 6-year bond, which pays a coupon of 9%, will be used by Newlife Forest Restoration to construct an industrial timber facility and expand an existing sawmill for the purposes of thinning forest areas to reduce wildfire risk. The coupon on the bond is tied to two targets: acreage of forest restored, and proportion of processed logs from restored areas. Meanwhile, the New York City Housing Development Corporation has raised $180.4m from a sustainable development bond to fund affordable housing. The bonds, which have maturities ranging from November 2022 to 2057, pay coupons between 0.9% and 3.5%.  

Car manufacturer Honda has announced plans to raise $2.75 billion from a series of three green bonds. The firm will seek to raise $1 billion each from 3- and 5-year notes and $750m from a 10-year note, with proceeds allocated solely to expenditures in the electric vehicles category including charging infrastructure. In other electric car news, Standard Chartered has led a syndicate of banks in arranging a €350 million green trade finance facility with Swedish electric car manufacturer Polestar. The facility will finance the import of electric vehicles into Europe and North America. 

Bazalgette Finance has raised £300 million in green bonds to help finance upgrades to London’s sewer system. The 12-year notes priced at 130 basis points above UK gilts and were four times oversubscribed. S&P Global recently assigned the company’s £10 billion bond programme a green transaction evaluation score of 95/100. 

Social housing firm bLEND saw its highest ever orderbook for a £107 million multi-tranche tap on its 2047 and 2054 social bonds. The orderbook reached five times oversubscription for the two tranches, which pay 2.9% and 2.95% respectively, with proceeds due to be lent to three housing associations. 

Water treatment firm Metito has signed a $120 million sustainability-linked loan with three middle-eastern banks. HSBC Bank Middle East acted as lead arranger and bookrunner on the deal, with Ahli Bank of Kuwait contributing $40m and Commercial Bank of Dubai $20m. The interest rate on the loan is linked to four targets: increased use of recycled wastewater, increased use of recycled sewage water, increased capacity for treated wastewater and a lower lost time to injury frequency rate. 

Meanwhile, HSBC has lent S$150 million (€100 million) to Sabana Industrial Real Estate Investment Trust in its first sustainability-linked loan. Sabana will receive an interest rate discount if it hits energy and water intensity targets for portfolio buildings. 

Indian solar developer Avaada Energy has raised R14.4 billion (€171 million) from a 3-year green bond. Axis Bank and ICICI Bank arranged the deal, which Avaada said saw “overwhelming interest” from investors, and pays 6.75%. 

Truist Financial Corp funded 22,000 affordable homes with the proceeds of its $1.25 billion social bond, according to its 2021 impact report. The proceeds from the bond funded 267 developments across 15 US states, with the majority of proceeds spent in Florida, North Carolina and Virginia.