Firms Include Green Bonds in Larger Debt Offerings

Corporate green bond issuance has reached new highs as U.S. companies including chipmaker Micron Technology Inc.,

Walmart retailer Inc.

and the data center company Equinix Inc.

add bonds as part of larger traditional bond offerings.

Growing issuance of green bonds, which fund environmentally friendly projects, comes as companies face pressure from investors, regulators and employees to show the steps they are taking to improve the environment . They achieve this in particular by issuing debt linked to sustainability objectives.

More companies are adding green bonds as tranches in larger offerings, reflecting strong investor demand and the fact that investment banks have created groups dedicated to sustainability, according to Matt Toole, director transaction intelligence at financial data provider Refinitiv.

“It’s definitely fast becoming a staple part of the fundraising world,” Mr. Toole said.

U.S. companies have raised $ 47.04 billion in revenue by issuing green bonds this year through Oct. 29, 65% more than the same period last year, according to Refinitiv. The total amount raised by companies so far in 2021 exceeds the previous year as a whole, when companies raised $ 32.7 billion, Refinitiv said.

Tech companies like Amazon.com Inc.,

Salesforce.com Inc.

and alphabet Inc.

Over the past year, have included another type of project finance bond, called the sustainability bond, as part of larger corporate offerings. Sustainability bonds fund projects that include both green and social projects, such as affordable housing.

Micron, based in Boise, Idaho, closed on a $ 1 billion green bond on Monday. The company plans to spend the proceeds on projects to increase its use of renewable energy and make its buildings more energy efficient, among other priorities, the company said. The green bond, due to be repaid in 2032, is part of a larger $ 2 billion offering. The other two traditional bonds included in the offer (a 20 and 30 year bond) refinance the existing debt.

Last year, Micron pledged to spend $ 1 billion over the next seven years on environmental projects. The company originally planned to fund these projects with a $ 750 million green bond and use cash for the rest. But he increased his supply to $ 1 billion after seeing strong investor demand for the debt.

David Zinsner, Chief Financial Officer of Micron Technology


Photo:

Micronic Technology

“Fixed income investors are looking for opportunities to make investments that are projects related to the environment,” said CFO David Zinsner. “We were aligned with what I think the fixed income market was looking for. “

Walmart, based in Bentonville, Ark., Issued a $ 2 billion green bond in September to fund projects related to renewable energy, water efficiency and natural habitat restoration . The company said at the time that the bond was designed to mark its commitment to achieve 100% renewable energy by 2035 and zero carbon in its operations by 2040. The green bond was a tranche of a larger supply of $ 7 billion.

“Becoming a regenerative business is a journey. This green bond indicates that we are continuing to make progress, ”said Kathleen McLaughlin, director of sustainability at Walmart, in a press release linked to the September 23 announcement.

Equinix, a data center owner based in Redwood City, Calif., Issued a $ 1 billion green bond in May, its third such offering, as part of a larger $ 2.6 billion offering. of dollars. The company said at the time that it planned to use the proceeds from the green bond offering to fund projects related to renewable energy, waste management and other related priorities.

Micron pays an interest rate of 2.703% on its bond. The company estimates that it benefited from a discount of five hundredths of a percentage point on the green bond compared to what it would have received in a traditional bond offering, due to strong demand, according to Zinsner.

The timing of Micron’s green bond announcement coincides with the United Nations climate change conference, known as COP26, in Glasgow. Earlier this year, the company also refinanced a revolving credit facility and term loan to include interest rates tied to sustainability goals.

Write to Kristin Broughton at [email protected]

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