Terms of the transaction
Issuer: European Bank for Reconstruction and Development (EBRD)
Rating: Aaa / AAA / AAA (all stable) (Moody’s / S&P / Fitch)
Issue Amount: USD 500,000,000
Pricing Date: 28th September 2017
Settlement Date: 5th October 2017
Maturity Date: 15th July 2021
Re-Offer Price/Yield: 99.805% / 1.929%
Coupon: 1.875% (semi-annual, 30/360)
Re-offer vs. mid-swaps: +3bps
Re-offer vs. Benchmark: UST 1.375% due 15th September 2020 +33.2bps
Joint Bookrunners: Barclays, Citi and Crédit Agricole CIB
Context of the transaction
On Thursday 28th September 2017, the European Bank for Reconstruction and Development (EBRD), rated Aaa (stable) / AAA (stable) / AAA (stable), successfully issued a USD 500 million short 4-year Global Green Bond. This new benchmark transaction, which is due on 15 July 2021, pays a coupon of 1.375% and is priced with a spread of +3bps over mid-swaps, equivalent to +33.2bps over the UST 1.375% due 15th September 2020. Barclays, Citi and Crédit Agricole CIB acted as Joint Bookrunners.
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.
This transaction is only the third time that EBRD has issued a Green Bond in benchmark format. EBRD first started issuing Green Bonds in 2010 and its Green Project Portfolio includes 349 projects worth a total EUR 3.8bn based on operating assets as at 30 June 2017. Cumulatively EBRD has issued 65 Green Bonds totaling EUR 2.3 billion equivalent since 2010.
EBRD is one of the largest investors in environmental projects in its countries of operations, including €12.2 billion in energy efficiency, climate change and sustainable resource finance as at 2Q 2017 under the EBRD Green Economic Transition (“GET”) approach (The GET includes projects undertaken under two previous initiatives: the Sustainable Energy Initiative and the Sustainable Resource Initiative).
Taking advantage of the positive market environment, the mandate was announced at 10:30am London time on Wednesday 27th September 2017 for a USD short 4-year Green Bond benchmark transaction. Initial Pricing Thoughts (IPTs) were simultaneously released at mid-swaps +4bps area.
The announcement was then followed by a global investor conference call on Wednesday 27th September, during which EBRD explained its focus on the environment and adherence to the Green Bond Principles.
With Indications of Interest (IOIs) already around USD 500mn, the Joint Lead Managers opened books at 8:00am London time with an official price guidance of mid-swaps +4bps area, in line with IPTs.
The low spread sensitivity of orders allowed for the guidance to be set at mid-swaps +3bp at 13:15pm London time, with orders in excess of USD 600mn. Books closed at 14:30pm London time and EBRD launched a USD 500mn deal.
EBRD’s USD short 4-year Global Green Bond priced at 15:45pm London time with an annual coupon of 1.375%, an issue price of 99.805%, to give a spread of +3bps over mid-swaps, equivalent to 33.2bps over the UST 1.375% due 15th September 2020.
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, including Barclays Treasury, Blackrock and AP3.
Fund Managers took the majority of the total allocation with 36% of the bonds, followed by Banks with 25%, Central Banks & Official Institutions (20%) and Pension/Insurance (19%). By geography, the Americas predominated (47%) followed by European investors (ex-UK) with 22%, the UK (21%), Asia (6%) and the Middle East (4%).
“Taking advantage of the strong market backdrop for high grade bonds and appetite for ESG investments, EBRD has achieved an impressive mix of green investor diversification and very attractive pricing. The trade reaffirms their commitment and leadership of this still growing sector and Barclays is proud to have been able to support this endeavor.”
Marco Baldini, Head of European Syndicate, Barclays
"EBRD’s third public USD green bond saw a high degree of interest from the SRI community across Europe & the US at a premium pricing. The transaction highlights the growing investor enthusiasm for Green bonds & EBRD’s leadership in the sector."
Ebba Wexler, Director, Public Sector DCM, Citi
The order book for this new successful USD Global Green Bond for EBRD is dominated by investors with strong commitment to the Green Bond market. It comes as a testimony of the quality of EBRD's Environmental Sustainability bonds programme.”
Tanguy Claquin, Head of Sustainable Banking at Crédit Agricole CIB
|Fund Managers 36%||Americas 47%|
|Banks 25%||European (ex-UK) 22%|
|Central Banks & OIs 20%||UK 21%|
|Pension/Insurance 19%||Asia 6%|
|Middle East 4%|