The structure of the double ESG bond inflicted critics as well as achievements. But it is sometimes situational, some firms and investors might find it problematic, but the rest disagree. Yunnan Provincial Energy borrowers for instance suit the structure and theme of double ESG bonds. But debate continues to surge.
Luying Gan, a head of sustainable bonds for debt capital markets in Asia Pacific at HSBC argued that the structure could accommodate borrowers to communicate with the market. However, a sustainability banker who is not involved in the trade said that the structure is interesting but it is less suitable for many issuers.
The sustainability baker said that is why people need to come to the market with both commitments. The borrower, according to the banker, might try for a bullet-proof trade. This is because the tenor is too short, then energy transition changes only in three years. The doubling up would demonstrate a real commitment for the transition.
Yunnan Provincial Energy for instance encountered issues with investors. There is 90% of indirect ownership from the Yunnan State-owned Assets Supervision and Administration Commission. So on the side of the buyers, they saw the name as a local government financing vehicle, and analyzed IFR Asia. Others saw it as a state-owned enterprise.
Moreover, the company is the only provincial energy vehicle in China’s southern province of Yunnan. It means that it has weaker financial strength than other provinces. The global coordinators of the project are HSBC, Guotai Junan International, and Industrial Bank Hong Kong branch. The bookrunners and lead managers are China Industrial Capital Corp, CLSA, and Hua Xia Bank Hong Kong branch. The sole green structuring bank was HSBC. The BBB- by Fitch would be the rating, it is in line with the guarantor.
