NADB sells green bonds in Swiss francs
May 21, 2020 |
Mexican-American development bank raises $352 mln, agrees to buy back $280 mln in 2022 notes
(Update in paragraph 3 to specify that the target markets for the green bond transaction were Swiss asset management and life insurance firms and pension funds.)
The North American Development Bank (NADB) raised CHF340 million ($352 million) from a two-part bond deal in the Swiss bond market on Wednesday as part of a liability management transaction, sources involved in the deal told LatinFinance.
The development bank priced CHF180 million of new 2028 green note at 100.011 with a coupon of 0.2% to yield 0.199%, or 65 basis points over mid-swaps. It also sold CHF160 million worth of 2033 notes at 100.409 with a coupon of 0.55% to yield 0.517%, or 80 basis points over mid-swaps.
As part of the transaction, the NADB agreed to buy back $280 million worth of existing 2.4% 2022 notes. The target market for the green bond issues were Swiss asset management and life insurance firms and pension funds, the sources said.
Guidance for the 2028 notes was set at 65 basis points, plus or minus five points, over mid-swaps, while guidance for the 2033 notes was set at 80 basis points, plus of minus five basis points, over mid-swaps.
"The economics of the operation were interesting, not only because rates in Switzerland are very low, but also because we were able to buy back a bond that had a higher coupon," said Julio Zamora, CFO of the San Antonio, Texas-based development bank. "We also achieved longer maturities with a fixed interest rate and greater flexibility in our balance sheet."
The size of orderbooks was not disclosed, but Zamora said the bond was very well received.
"It usually takes a full day to build an orderbook in Switzerland; ours was built in just a few hours," he added.
The NADB, which works within the US-Mexico border region, also announced on Wednesday the results of a tender offer to buy back up to $225 million out of $430 million outstanding in 2.4% 2022 dollar-denominated notes. It proposed to pay $1,045 for every $1,000 in principal through May 19. By Tuesday, a total of $378 million had been validly tendered by investors. The NADB elected to increase the size of the offer and agreed to buy $280 million or 73.63% of the validly tendered notes.
"In addition to being a liability management operation, this was an opportunity to issue green bonds," Zamora said. "More than 80% of our portfolio qualifies for green bonds. It’s part of our vocation as a bank since its birth in 1994. So, it was also an opportunity for investors that care for the environment to participate in our projects."
On Thursday, the NADB's board of directors will host an online meeting to exchange information and share views on environmental projects and issues affecting the US-Mexico border region.
Prior to Wednesday's bond sale, the NADB had sold in June 2018 CHF125 million worth of Swiss franc-denominated green bonds with a coupon of 0.3%. The notes, due in 2026, fell on Wednesday to 101.35 from 101.50 in the prior session, according to data provided by the Swiss Stock Exchange. NADB spent the proceeds from the 2026 green bonds on solar power projects in Sonora, Chihuahua and California and on wind farms in Coahuila and Nuevo León.
Sustainalytics, a company that rates companies on their environmental, social and corporate governance performance, said in May that the NADB's green bond framework was credible, impactful and aligned with the core components of the Green Bond Principles 2018.
Moody's said in a periodic review in January that the development bank's Aa1 rating is supported by adequate capital, strong assets, conservative liquidity management and strong member support. NADB is owned by the US and Mexican governments.
In March, Fitch Ratings affirmed NADB's long-term issuer default rating at AA with a stable outlook, based on assessments of the bank's solvency and liquidity.