Landsvirkjun has signed an agreement with US and UK institutional investors to issue USD 80 million senior unsecured notes in the US Private Placement (“USPP”) market. The issue reiterates Landsvirkjun’s focus on sustainability-linked financing, linking the pricing of the notes to the company’s carbon sequestration targets, in line with the UN's Sustainable Development Goal (“SDG”) 13 on climate action.
The offering was very well received, with an order book which was multiple times oversubscribed. The attractiveness of this funding opportunity was enhanced by the ability of the US and UK investors to provide short-dated notes in a favourable rate environment. The notes have a 3-year maturity and carry a fixed interest rate of 2.51%, with semi-annual payments. Proceeds from the transaction will be used to refinance existing debt and for general corporate purposes.
The issuance demonstrates Landsvirkjun’s continued commitment and focus on sustainable development and follows the execution of a USD 150 million sustainability-linked revolving credit facility in 2019 and the successful placing of a USD 200 million green bond in the USPP market in 2018.
Landsvirkjun is the first issuer in Europe of an SDG-linked USPP. The USPP is understood to be one of the first SDG-linked issuances in Europe overall and underscores Landsvirkjun’s innovation and leadership in this fast-moving space.
As part of the transaction, Landsvirkjun has committed to increase its carbon sequestration efforts to reach at least 32,538 tons of CO2 eq. for 2020 (up by at least 2% from 31,900 tons CO2 eq. for 2019). The USPP is directly tied to this commitment whereas the annual coupon will increase by 10 bps if Landsvirkjun fails to achieve this target. The target forms part of Landsvirkjun’s strategy to become carbon neutral by 2025.
Barclays acted as Sole Placement Agent in this transaction. Landsvirkjun’s legal advisors were Logos and Morrison & Foerster. The funders’ legal advisor was Greenberg Traurig.
“We are very pleased with our second successful issuance in the USPP market and the support that we have received from our investor group. The private placement provides further diversification of funding sources and demonstrates our ability to access financing on attractive terms. As sustainability and the environment are core to our social responsibility initiatives, we are proud to have issued the first SDG-linked USPPs in Europe, which further reinforces our commitment to achieving carbon neutrality by 2025”.