Chile issues Latin America's first sovereign green bond

Chile issues Latin America's first sovereign green bond

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Chile became the first Latin American sovereign to issue a green bond on Monday, selling $1.42bn in 2050 notes at a historically low rate of 3.53%.

The leads BNP Paribas, Citi and HSBC put the initial price talk at 120bp over US Treasury notes, according to a source involved in the deal. They lowered the spread to 95bp after demand reached $6.7bn, or 12.8 times the size of the deal.

The new notes carried a negative new issue concession of 5bp, the Finance Ministry said in a press release. More than 260 accounts from Europe, Asia and the Americas bought the notes, it added.

The government will use $523m from the new issue to fund renewable energy facilities and other projects to protect the environment. It will use $895m to buy back bonds due in 2020, 2021, 2022, 2025, 2026, 2042 and 2047, according to a SEC filing.

Cleary Gottlieb and Morales y Besa were Chile's legal advisors on the deal.

Ahead of the transaction, Chile worked with the IDB and the environmental, social and governance (ESG) ratings agency Vigeo Eiris to develop a framework for the green bond.

Chile became the second sovereign issuer after the Netherlands to receive certification from the Climate Bonds Initiative, which evaluated the projects that Chile plans to finance with money from the green bond.

The water utility company Aguas Andinas issued the first green bonds in the Chilean market in April last year, selling UF1.5m ($68m) in inflation-linked notes at 1.8%. It followed that issue with another UF2m in local green bonds in April this year.

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