Indorama Ventures issues a sustainability-linked bond worth THB 10 billion

Indorama Ventures Public Firm Limited (IVL), announced the issuance of a THB 10 billion triple-tranche Sustainability-Linked Bond (SLB), demonstrating the company’s long-term commitment to long-term growth. It is Thailand’s largest SLB and the first to be provided to both institutions and high-net-worth individuals.

The bond is part of IVL’s overall financing plan, which includes a variety of instruments tied to the company’s long-term sustainability goals. It follows internationally recognized guidelines, such as the International Capital Markets Association’s (ICMA) Sustainability-Linked Bond Principles and the Loan Market Association’s (LMA) Sustainability-Linked Loan Principles.

The SLB is based on IVL’s ability to reduce GHG emissions intensity by 10% by 2025 (from a 2020 baseline), increase PET bale recycling to 750,000 tonnes per year by 2025, and achieve a 25% renewable electricity consumption rate by 2030.

Asset managers, commercial banks, insurance companies, cooperatives, and high-net-worth people are targeted by the triple-tranche structure, which contains 5-, 7-, and 10.5-year tenors with coupons of 2.48%, 3.00%, and 3.60% per year, respectively. Due to considerable interest in the sustainability-linked instrument, the orderbook grew to nearly THB 17.8 billion, more than three times the targeted issue amount of THB 6 billion with a green shoe option of THB 4 billion.

Because of the significant investor demand, the business chose to exercise the green shoe option and extend the issue to THB 10 billion, setting a new record as Thailand’s largest SLB transaction. The Hongkong and Shanghai Banking Corporation Limited, Bangkok Branch, and Bangkok Bank, Kasikorn Bank, Krungthai Bank, Siam Commercial Bank, and The Hongkong and Shanghai Banking Corporation Limited, Bangkok Branch, were selected as arrangers and bookrunners for the transaction by IVL.

Following a good rebound in petrochemicals and derivatives and IVL’s improving profitability, TRIS Rating granted the bond an AA- rating and a “stable” outlook on September 23, 2021.

In the event that the sustainability performance targets are not met, all tranches must purchase Energy Attribute Certificates (EAC) or voluntary carbon offsets (SPT). Tenors with maturities of 5 and 7 years will be tested on December 31, 2025, and the 10.5-year tenor will be tested on December 31, 2030. During the testing dates, the performance of the SPT will be independently confirmed. The proceeds will be utilized to fund IVL’s corporate operating capital as well as refinance existing debt.

Yash Lohia, Chief Sustainability Officer at Indorama Ventures (IVL), said that this bond represents the firm commitment to sustainability and offers incentives for the company and its stakeholders. It’s a big step forward in their efforts to improve IVL’s financial structure and provide investors a chance to help the chemical industry evolve for the better. Investors have made their position on climate action plan with the success of this bond offering, as they shift money to align their portfolios with carbon neutral targets. The financial markets recognize their ambitious sustainability endeavor, as seen by today’s sustainability-linked bond, and they look forward to working together for a more sustainable industry.

Thiti Tantikulanan, Capital Markets Business Division Head at Kasikorn Bank (KBank), said that KBank is thrilled to be able to cooperate with IVL on this interesting transaction, which marks an important development in the sustainability of the Thai capital market. Thai investors are unfamiliar with SLBs, although the product provides the necessary incentives for both issuers and investors. This SLB has a wider range of features than the typical coupon adjustment seen on the market. Additional obligations to buy Energy Attribute Certificates (EAC) or voluntary carbon offsets contribute to ESG goals while also providing market innovation. The issuance’s tremendous investor response to the issuance is testimony to their confidence in IVL and interest in sustainability.

In recent years, IVL has been able to receive loans tied to improvements in the company’s sustainability performance as a global leader in ESG integration. Thailand’s first Green Loan of USD 200 million and EUR 200 million from Mizuho Bank in Japan, Thailand’s first cross-border Sustainability-Linked Ninja Loan worth USD 225 million from 16 Japanese institutions, and a Blue Loan of USD 300 million arranged by the International Finance Corporation and funded by the Asian Development Bank and DEG were among them.