Allen & Overy advises Wesfarmers on issue of AUD1bn in first sustainability-linked bonds issued in AUD
28 June 2021
In an Australian first, Allen & Overy has advised Wesfarmers Ltd on its issuance of AUD1 billion in sustainability-linked bonds linked to renewable energy and emissions performance under its AMTN programme.
The deal marks both the first sustainability-linked bonds (“SLBs”) to be issued in Australian dollars in the Australian market, and Wesfarmers’ first sustainability-linked note.
Wesfarmers is one of Australia’s largest ASX-listed companies and largest employers, spanning retail, chemicals, energy, fertilisers, industrials and safety.
The interest rate on the bonds is directly linked to Wesfarmers’ performance against two targets – the level of utilisation of renewable energy in the Group’s retail divisions, and the reduction in CO2e emissions intensity of ammonium-nitrate production in Wesfarmers Chemicals, Energy and Fertilisers division.
The bond issue consists of two tranches, AUD650 million seven-year unsecured, fixed-rate sustainability-linked bonds maturing in June 2028 (with a coupon of 1.94 per cent) and AUD350 million ten-year unsecured, fixed-rate sustainability –linked bonds maturing in June 2031 (with a coupon of 2.55 per cent). A step-up in the interest rate of 0.125% p.a. will apply in respect of each target which is not met.
Commenting on the transaction, Allen & Overy partner Karolina Popic said: “Wesfarmers’ issuance is a landmark transaction in the Australian market, being the first sustainability-linked bond issue denominated in Australian dollars. It is also emblematic of a trend toward large, industry-leading corporates favouring this kind of note issuance as a way to demonstrate their commitment to sustainability goals.
“This trend is being well received by Australian investors, as evidenced by the significant over-subscription to this issue. We are proud to have advised Wesfarmers on this important transaction in the Australian market.”
The A&O capital markets team was led by partner Karolina Popic with the assistance of lawyer Caitlin Lee. A&O’s tax team also assisted Wesfarmers on the transaction, comprising partner Ka Sen Wong, counsel Angela Melick and senior associate Alice Morstyn.
The joint lead managers were ANZ, BNP Paribas, Commonwealth Bank of Australia, National Australia Bank and Westpac. ANZ, BNP Paribas and Westpac were joint sustainability coordinators.
The note issuance comes off the back of Wesfarmers’ 2020 sustainability-linked loan arranged with the Commonwealth Bank of Australia.
Wesfarmers’ ground-breaking transaction closely follows Australian engineering company Worley’s globally-notable SLB issue, on which Allen & Overy also advised, as sustainability-linked bonds gain increasing prominence in capital markets transactions.
For more information, please contact Karolina Popic.