Woolworths, rated Baa2/BBB (Moody’s/S&P), is looking to access the huge and rapidly expanding local investor base for socially responsible assets with an inaugural Australian dollar Green bond offering.
Investor meetings will be held in Hong Kong and Tokyo this Thursday and Friday before the roadshow moves on to Sydney and Melbourne next Monday and Tuesday, arranged by ANZ, Citigroup and JP Morgan.
The first Green issuance by an Australian retailer coincides with the finalising of criteria by the Climate Bonds Initiative in the supermarket sector.
The previously published Responsible Investment Benchmark Report 2018 showed A$866bn (US$615bn) and NZ$183.4bn (US$125bn) were being managed as responsible investments in Australia and New Zealand as of December 31 2017 ahead of further substantial growth in 2018.
“The investment community is fast realising the correlation between consideration of environmental, social and governance factors, and positive portfolio performance. At the same time, consumers are increasingly demanding investment products that align with their values,” said Simon O’Connor, CEO of Responsible Investment Association Australasia, in today’s press release. “The recently announced Australian Sustainable Finance Initiative and NZ Sustainable Finance Forum will both play important roles in recommending policy to further accelerate this growth.”
Issuance has expanded to reflect rising demand, with Green, Social and Sustainable bonds and ABS sales in Aussie dollars and Australian credit bond sales offshore reaching a record A$8.4bn-equivalent from 11 credits last year in the state government, banking, education, SSA and consumer lending sectors.
This was well above 2017’s previous whole-year total of A$5.2bn-equivalent, also from 11 credits, which in turn represented a massive leap from the respective 2014, 2015 and 2016 totals of A$1.0bn, A$1.4bn and A$1.1bn, from three, three and five issuers.
So far this year, Asian Development Bank has smashed SSA Green Kangaroo records with a A$1bn 5yr print while Queensland Treasury Corp issued a A$1.25bn Green 10-year note.
Consumer lender Flexigroup widened the ABS patch with A$90.9m of Green notes including the sector’s first subordinated tranches.
Across the Tasman Sea, 2019 has seen the first corporate Kiwi Green bond supply with two NZ$100m issues from Contact Energy and Argosy Property, while Housing New Zealand printed a record-busting NZ$500m 7.5-year Sustainability bond.
Only two Green bonds had previously been issued in the New Zealand market, an inaugural NZ$125m 10-year Kauri in July 2017 before Auckland Council became the first domestic Green bond issuer with a NZ$200m five-year sale in June 2018.
Woolworths previously sold a A$500m seven-year domestic MTN in 2012, the 6.0% March 21 2019s, which matured recently.
That transaction enjoyed substantial scarcity value as a rare corporate blue chip issue in a financial-dominated market.
As a result, it priced around 25bp-30bp inside major bank curves, despite being rated three notches lower by S&P at the time, at A- versus AA-.
Woolworths has subsequently been downgraded two notches by S&P to BBB and has an equivalent Moody’s rating of Baa2.
Source: Nasdaq