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Green Finance / Treasury & Capital Markets
Robust deal flow continues for sustainable financing
CIMB Bank prices second SDG bond and the first to be issued in the Reg S/144A market by a Malaysian lender
Chito Santiago 17 Jan 2022

Issuance of sustainable financing in Asia continues at a rapid pace in January as both issuers and investors further strengthen their environmental, social and governance (ESG) commitments, fuelling a robust deal flow in the US dollar bond market.

One of Malaysia’s biggest lenders CIMB Bank led the issuances as it priced on January 13 a US$500 million Sustainable Development Goal (SDG) bond, representing its second SDG bond and the first one ever to be issued in the Reg S/144A market by a Malaysian bank in the international debt capital markets.

The 5.5-year offering was priced to yield 2.189%. This represented a spread of 70bp over the US treasuries, or 30bp tighter than the initial price thought of 100bp area. Fund managers were the biggest buyers of the bond as they accounted for 43%, followed by banks with 34%, securities firms 22% and corporates 1%.

CIMB’s first SDG bond was issued in September 2019 in the Formosa market amounting to US$680 million. The five-year floating rate note was priced at a spread of 78bp over the three-month US dollar Libor.

The latest deal was drawn under the bank’s US$5 billion global medium-term note (MTN) programme. The proceeds will be used to finance various eligible assets and projects such as affordable housing, start-ups and SMEs, public schools and hospitals, green mass transit, climate-resilient buildings and infrastructure, forestry and wildlife conservation projects, as well as Covid-19 and other global pandemic financing.

Sukuk framework

The SDG bond complies with CIMB Group’s updated SDG bond and sukuk framework, which is aligned with the latest market standards, including the Green Bond Principles, Social Bond Principles and Sustainability Bond Guidelines issued by the International Capital Market Association (ICMA) and assessed by second party opinion provider Sustainalytics.

Commenting on the deal, CIMB Group CEO Dato Abdul Rahman Ahmad says the SDG bond further expands the group’s fixed income investor base into the US and at the same time, supports its aim to be a catalyst for real sustainable action in the Asean region. “As sustainability is a strategic agenda for CIMB, this SDG bond also enables us to diversify our fund-raising strategy and tap into a fast-growing pool of sustainable investment funds in the global markets,” he points out. “This is very much in line with our commitment to mobilize 30 billion ringgit (US$7.18 billion) towards sustainable finance by 2024.”

BofA Securities, CIMB Investment Bank, J.P. Morgan and Standard Chartered were the joint bookrunners for the transaction. BofA Securities and CIMB were also the joint arrangers of the global MTN programme.

Two issuers from India, Indian Railway Finance Corporation (IRFC) and JSW Infrastructure, also accessed the Reg S/144A market on January 13 with IRFC pricing a US$500 million green bond and JSW Infrastructure a US$400 million sustainability-linked bond (SLB).

IFRC arranged a 10-year trade, which was priced at par with a similar coupon and re-offer yield of 3.57%. This was equivalent to a spread of 185bp over the US treasuries, which was in line with the final price guidance and 25bp tighter than the initial price range of 210bp area. The proceeds will be used to finance eligible green assets through finance leasing model and refinancing the existing debt utilized for eligible green assets under IRFC’s green financing framework for green debt.

The deal attracted a total order book in excess of US$1.3 billion from 81 accounts, with 60% of the paper distributed in the US, 25% in Asia and 15% in EMEA. By type of investors, asset and fund managers took 59% of the bond, while pension funds, insurance companies and central banks bought 37%. The remaining 4% went to bank and private bank investors.

BNP Paribas, DBS, HSBC, MUFG Bank, State Bank of India (London) and Standard Chartered were the joint bookrunners and lead managers for the deal. Climate Bonds Initiative was the green certification provider.

The JSW Infrastructure SLB offering was for seven years, which was also priced at par with a similar coupon and re-offer yield of 4.95%. The deal features a coupon step-up of 25bp per year if it fails to achieve the sustainability performance target set by September 30 2026.

Deutsche Bank was the sole SLB structuring agent for the transaction, as well as a joint global coordinator and bookrunner along with Standard Chartered. The other joint bookrunners were Axis Bank, Barclays and Emirates NBD Capital. DNV was the second-party opinion provider.

Korean issuers

Also accessing the Reg S/144A market was South Korean lender Woori Bank, which priced on June 12 a US$500 million sustainable bond. The five-year deal was priced at a spread of 60bp over the US treasuries, or 30bp inside the initial price range of 90bp area. It garnered a total demand of over US$1.3 billion from 70 accounts with 84% of the bonds allocated in Asia, 11% in EMEA and 5% in the US. By type of investors, banks accounted for 59%, asset and fund managers 27%, and central banks, sovereign, supranational and agency (SSA), and insurance companies 14%.

The net proceeds from the issuance are earmarked to finance eligible categories of projects in accordance with Woori Bank’s green, social and sustainability bond framework. BNP Paribas, Citi, Crédit Agricole CIB, J.P. Morgan, MUFG Bank and Société Générale are the joint bookrunners for the transaction.

Shinhan Card on January 14 announced that it has mandated BNP Paribas, Citi, Crédit Agricole CIB, MUFG Bank and Standard Chartered to arrange a series of fixed-income investor conference calls commencing on January 17. A US dollar-denominated Reg S social bond offering with an expected tenor of five years may follow, subject to market conditions.

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