Bonds & Fixed Income | |
Bonds & Fixed Income | |
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Monday, January 07, 2019 08.07AM /
By EBRD
On Thursday 03 January
2019, the European Bank for Reconstruction and Development (EBRD), rated
Aaa (Moody’s) / AAA (S&P) / AAA (Fitch), issued its debut EUR-denominated
Green Bond benchmark, a 5-year €600 million Global transaction. The new issue
is due on 10 January 2024, pays a coupon of 0.000% and priced with a spread of
13bps through mid-swaps, equivalent to +39.9 bps over the OBL 0.000% October
2023.
BofA Merrill Lynch,
Crédit Agricole CIB and Morgan Stanley acted as Joint Bookrunners.
This transaction
represents EBRD’s inaugural benchmark Green Bond in the EUR market, and its fourth
benchmark-sized Green Bond. As one of the pioneers in the Green Bond market,
EBRD’s reputation and credibility is firmly established among the Sustainable
& Responsible Investment (“SRI”) community, who welcomed this opportunity
to add the EBRD name to their EUR portfolios. Indeed, over two-thirds of the
final deal was allocated to investors with a SRI focus. Targeting a size of
€500million, EBRD also attracted demand from other high quality Central Bank
and Bank Treasury investors, which saw the order book exceed €680million.
Fortunately, EBRD was able to be flexible in its sizing and upsize the
transaction to €600million to satisfy demand, while still tightening the
pricing.
For EBRD to effectively
open the benchmark new issue market in EUR SSAs for 2019 might have been
considered a surprise by some, however, the combination of a compelling credit
story, a well-established reputation in the SSA market, and the added attraction
of the Green Bond format proved to be a compelling formula to galvanise
investors at the start of the new year, and EBRD was dynamic enough to take
advantage of a relatively quiet window in the market.
EBRD Green
Bond Programme
The proceeds of EBRD's
environmental bonds are earmarked to support a specific portfolio of
environmentally and socially sustainable projects (the Green Project Portfolio
or GPP), which currently comprises investments in the following 5 areas: Energy
Efficiency, Renewable Energy, Water Management, Waste Management and Air
Pollution Prevention & Sustainable Transport.
The EBRD first started
issuing Green Bonds in 2010 and its Green Project Portfolio includes 379
projects worth a total EUR 4.1bn based on operating assets as at 30 Sep 2018.
The EBRD is one of the
largest investors in environmental projects in its countries of operations,
having invested over €12.2 billion in energy efficiency, climate change and
resource finance under its Sustainable Resource Initiative as at 3Q 2018.
Issuer: European Bank for Reconstruction & Development (EBRD)
Issue amount: EUR 600 million
Pricing Date: 03 January 2019
Settlement Date: 10 January 2019
Coupon: 0.000% (annual, Act/act)
Maturity Date: 10 January 2024
Re-offer price/ yield: 99.900% / 0.020%
Re-offer vs. mid-swaps: -13bps
Re-offer vs. Benchmark: OBL 0.000% October 2023 +39.9bps
Joint Lead Managers: Bank of America Merrill Lynch, Crédit Agricole CIB, Morgan Stanley
Transaction execution
Taking the first mover’s
advantage in a quiet EUR primary market at the start of the year, the decision
was taken to announce the mandate at 3:15pm London time on Wednesday 2nd
January for a €500million 5-year fixed rated Green Bond transaction.
The announcement was
followed by the release of IPTs the following morning, and a global investor
conference call, during which EBRD focused on its Green Bond Framework and
adherence to the Green Bond Principles.
Initial pricing thoughts
(IPTs) were released at MS-12bps area at 8:00am London time on Thursday 3
January. The Joint Lead Managers opened books at 10:00am London time with
an official price guidance of MS-12bps area, in line with IPTs and Indications
of Interest (IoIs) in excess of €400million.
Momentum continued
growing during the morning, with high quality real money accounts across Europe
placing their orders allowing for the spread to set tighter at MS less 13bps,
as orders exceeded 680million. With very limited pricing sensitivity, a testament
to the quality of EBRD credit and green framework, books closed at noon, and
the transaction priced at 3.30pm London time.
The orderbook reflects
the high quality and diversity of demand for EBRD Green Bonds. Investors with a
commitment to sustainable investing represented a very strong proportion of the
final allocation.
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