BPI prices landmark green bond Swiss franc and US dollar deals
Bank launches 100-million-Swiss franc two-year offering, which is the first ever Philippine green bond offered overseas, and a US$300 million five-year offering
The Bank of the Philippine Islands (BPI) priced two landmark green bond transactions in a week as a demonstration of its commitment to finance projects with clear environmental benefits.
The bank first tapped the Swiss franc bond market as it printed on August 29 a 100-million-Swiss franc (US$102 million) offering, representing the first ever public Swiss franc-denominated issuance out of the Philippines. Labelled as an Asean green bond, it was also the first ever rated Philippine green bond in the international capital markets.
The two-year bonds, carrying an annual zero coupon, were priced at 100.040% with a re-offer yield of -0.020%. This represented a spread of 96.8bp over mid-swaps and the first negative yielding bonds to be issued out of the Philippines in the offshore debt markets.
In accessing the Swiss franc bond market, BPI executive vice-president and CFO Maria Theresa Marcial says it offers attractive propositions for the bank, including investor diversification. It also offers size flexibility with the minimum amount of 100 million Swiss francs versus US$300 million in the US dollar market.
“Flexibility in size was a significant driver to choose the Swiss franc bond market over the US dollar bond market,” Marcial told The Asset. “The opportunity was present to issue an Asean green bond in light of the size of the portfolio, which was less than what would have been required for a straight US dollar issue. Both the CHF and the US dollar rates are expected to further decline in line with the current direction of various central banks’ policies.”
The Swiss franc bond market likewise provides a flexible documentation process – in fact, the documentation for the transaction occurred post-pricing and finalized by the settlement, which is typically T+4 weeks.
In marketing the deal, BPI conducted a non-deal roadshow in Switzerland back in June to engage the CHF bond investors. The bank and the deal arrangers – BPI Capital Corporation, Credit Suisse and UBS – on August 28 identified the feasibility of a 100-million-Swiss franc two-year offering at a yield of between -0.050% to zero percent, and eventually announced the transaction the following morning.
The deal attracted strong demand from a broad range of investors. “Our previous US dollar issuances were mostly subscribed to by Asian investors and the CHF deal further diversified our investor base,” Marcial says. Fund managers accounted for the bulk of the paper with 70%, while the rest were bought by private banks (16%), insurance companies (13%) and pension funds (1%).
BPI quickly followed the Swiss franc transaction with a US dollar trade on September 3, also labelled an Asean green bond, amounting to US$300 million, which generated a robust investor demand.
The Reg S five-year offering was priced at 99.641% with a coupon of 2.50% to offer a yield of 2.577%. This was equivalent to a spread of 120bp over the US treasuries, or at the tight end of the final price guidance of between 120bp and 125bp, and 25bp inside the initial guidance of 145bp area.
Both the coupon and yield were the lowest ever paid for a US dollar-denominated bond out of the Philippines and it also marked the lowest credit spread ever paid by a Philippine bank.
The issuance, was over 4x oversubscribed with an order book of US$1.25 billion. In terms of geographic distribution, 81% of the bonds were allocated in Asia and 19% in EMEA. By type of investors, asset and fund managers bought 56% of the bonds; banks, financial institutions and private banks 30%; and insurance companies, pension funds and corporates 14%.
The Philippine Securities and Exchange Commission has confirmed that the bonds comply with the requirements under the Asean Green Bonds Circular and as such qualified to be issued under the Asean green bond label.
BPI Capital acted as the sole global coordinator for the transaction, as well as a joint bookrunner and lead manager, along Bank of America Merrill Lynch, Citi, Credit Suisse, Mizuho Securities and UBS.
Proceeds from both the Swiss franc and the US dollar green bonds – drawn under BPI’s US$2 billion medium-term note programme – will be used for the financing and/or refinancing of green eligible projects as described in BPI’s green finance framework.
BPI established the green finance framework in June this year, and provides guidelines for the following with respect to any green bonds or loans that it is going to issue: evaluation and selection of eligible projects, management of proceeds and reporting. The framework is aligned with the International Capital Market Association Green Bond Principles, the Asean Green Bond Standards and the Loan Market Association Green Loan Principles.
Sustainalytics provided a second-party opinion on the BPI framework.
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