Sydney Airport has issued an approximately $600 million multi-tranche US private placement bond featuring a $100 million sustainability linked tranche.
This is Sydney Airport’s third issuance into the US private placement market, and the first sustainability-linked bond in the US private placement bond market.
“We are very pleased to proactively strengthen our balance sheet with this ground-breaking deal,” said Greg Botham, Sydney Airport CFO. “The continued issuance of our longest ever bonds at attractive pricing followed an extensive debt investor update throughout the US, with strong demand across three different currencies.”
As part of the sustainability-linked tranche, the tranche coupon will decrease or increase depending on Sydney Airport’s sustainability performance over time, as assessed by an independent third party, Sustainalytics.
“We are also proud to build on our 2019 market-leading sustainability linked loan with an innovative sustainability-linked bond, a first in the US private placement and global bond markets,” Botham said. “Our sustainability-linked tranche reinforces our commitment to sustainability leadership and provides additional motivation to drive further improvement in our sustainability performance.”
Bond proceeds raised “will be used to repay all drawn bank debt, unlocking additional liquidity to cover future debt maturities and to fund planned investment,” Sydney Airport said.
Sydney Airport noted that this private placement is the first sustainability-linked bond with two-way pricing across bond markets globally.
Sydney Airport last year secured a $1.4 billion sustainability-linked loan. Under the structure of that loan, the bank debt facility margins will marginally decrease or increase depending on Sydney Airport’s sustainability performance over time, as assessed by an independent third party, Sustainalytics.
The sustainability-linked bond tranche has been structured in a similar way to the 2019 loan, with “ modest but meaningful two-way changes to our pricing based on our sustainability performance,” according to Sydney Airport.
Sustainalytics measure Sydney Airport’s performance on “a wide category of outcomes across the entire ESG spectrum including sustainability performance and disclosures in the areas of corporate governance, safety and waste.” Sydney Airport has both discrete initiative to drive improvement in those areas, as well as activities relating to ongoing climate resilience, electrification, and airspace and airfield efficiency programs.
Sydney Airport partnered with NAB, Mitsubishi UFJ Financial Group (MUFG) and Scotiabank to deliver this the transaction, which features tenors from 15 years to 30 years. The sustainability tranche has a 20 year tenor, and under the structure’s terms, coupons can vary up or down periodically depending on Sydney Airport’s performance against its sustainability metrics over time.
“MUFG is delighted to have again assisted Sydney Airport in a highly successful and competitively priced US Private Placement issuance with a focus on lengthening its debt tenor and facilitating direct Australian dollar investment,” said Matthew Carr, MUFG’s managing director and head of debt capital markets for Australia and New Zealand. “We are proud to have priced the world’s first ESG-linked tranche and to have partnered with Sydney Airport and USPP investors over the course of many months; from original concept through all structural aspects and ultimately an outstanding outcome providing a direct link between the Airport’s sustainability performance and its funding costs.”
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