Chemical producer Indorama Ventures (IVL) has issued Thailand's first and largest sustainability-linked bond (SLB) worth 10 billion baht.
The bond's triple-tranche structure includes five-, seven- and 10.5-year tenors and offers coupons of 2.48%, 3% and 3.6% per year, respectively.
Tris Rating assigned an AA- rating and a "stable" outlook for the bond in September, citing a solid recovery of petrochemicals and derivatives and IVL's growing profitability.
The SLB is tied to IVL's three performances: reducing greenhouse gas emissions by 10% by 2025 (from a 2020 base), increasing recycling of PET bale input to 750,000 tonnes per year by 2025 and achieving 25% renewable electricity consumption in 2030.
Yash Lohia, IVL's chief sustainability officer, emphasised that the bond reflects its clear commitment to sustainability and creates incentives for the company and its stakeholders. He added that the sustainability-linked bond serves as proof that the financial markets value ambitious sustainability efforts.
"It is an important step in our work to optimise IVL's capital structure and give investors an opportunity to contribute to the positive transformation of the chemical industry. With the success of this bond issuance, investors have made their position on climate action clear as they shift capital to align their portfolios with carbon neutral targets."
IVL exercised the greenshoe option and increased the issuance to 10 billion baht.
The move came after the SLB received strong interest from investors, pushing the company's order book value to over 17.8 billion baht and triple subscription over the planned issuance amount of 6 billion baht with a greenshoe option of 4 billion baht. As a result, this SLB has set a new benchmark as the largest SLB transaction in Thailand.
IVL appointed Bangkok Bank, Kasikorn Bank, Krungthai Bank, Siam Commercial Bank and HSBC's Bangkok branch as underwriters.
Thiti Tantikulanan, Kasikorn Bank capital markets business division head, welcomed the cooperation with IVL and viewed the move as a crucial development in sustainability for the Thai capital market.
"SLBs are new to Thai investors but the instrument creates the right incentives for issuers and investors. This SLB offers a greater variety of features than the simple coupon adjustment commonly seen in the market. The additional covenants to purchase Energy Attribute Certificates [EAC] or voluntary carbon offsets contributes to ESG goals and provides innovation to the market," said Mr Thiti.
Under the terms, all tranches must purchase EACs or voluntary carbon offsets in the event of failure to meet sustainability performance targets (SPTs).
The testing dates for tenors with a maturity of five and seven years are Dec 31, 2025, and Dec 31, 2030 for the 10.5-year tenor. The SPT performance will be independently verified upon the testing dates.
Proceeds from the issuance will be used to finance IVL's corporate working capital and refinance existing debt.
In recent years, IVL secured loans linked to improvements in the company's sustainability performance, including Thailand's first green loan of US$200 million and €200 million from Japan's Mizuho Bank, Thailand's first cross-border sustainability-linked loan of $225 million from 16 institutions in Japan, and a $300 million blue loan arranged by International Finance Corporation and funded by Asian Development Bank and DEG.