Green Bond Review – April 13

    Stockholm (NordSIP) – This week, the Nordics saw yet another successful green bond issuance. Jernhusen is a Swedish state-owned single A-rated company which owns, develops and manages the main railway stations, station areas, maintenance depots and freight terminals along the Swedish railway network. Green bond investors eagerly awaited the arrival of this new issuer on the green bond market, as it represents an opportunity to finance sustainable real estate and property development in support of increased travel and transport by train. “Jernhusen has a crucial role to play in the transmission to a fossil-free society,” commented Lars Mac Key at Danske Bank, who ran this issue’s book jointly with Handelsbanken. “The electrified train transport of people and goods in Sweden is an important part of the green transition.”

    The issue comprised two SEK bonds, one fixed rate (SEK 1 billion, equivalent to approx. €100 million) and one floating rate (SEK 500 million, equivalent to approx. €50 million), to be listed on Nasdaq OMX’s Sustainable Bond list in Stockholm.

    The level of interest was high indeed when the SEK 1.5 billion issue was completed on Tuesday, which was reflected by the tightness of the spreads. In the morning of April 10, Jernhusen announced that the dual tranche would be offered at aggressive price guidance of 3m Stibor +47/50bps, while the fair value indicated about 5bps wider than the lower-end of the range, according to Danske Bank. Only two and a half hours after the opening, the book closed at 47bps, after showing a total interest of SEK 2.2 billion, close to 1.5x the initial combined deal size.

    In total over 20 international and Swedish investors participated. About two thirds of the total issue went to pension and insurance companies, which represent dedicated green bond investor community. Fund and asset managers subscribed to just under one sixth of the total. One portfolio manager told us that, while they were supporting the issue with a small size investment, they found the pricing very tight. It should be seen as a positive sign however, that investors have the interest and the capacity to absorb good quality green bonds. Fund managers hope that this trend will encourage lower-rated issuers to offer green bonds as well, as it will make for more exciting return opportunities.

    Typically, for a fund manager like Spiltan Fonder’s Nicklas Segerdahl whom we spoke to last week about the Klövern bond, Jernhusen is too highly ranked. He therefore did not participate in this issue. “When we invest, we aim to find credit migration,” explains Segerdahl. “This means that we look for issuers who we think have the prerequisites to receive a better rating further down the line, providing an opportunity for a future upgrade of the bond we already own. Such events increase the value for our investors. When it comes to Jernhusen, they already have a high rating and they’re closely linked to the Swedish state.”

    Prior to the issue, Jernhusen developed a green bond framework in March. The document describes for example what the proceeds from the green bonds issue can be used for. It was reviewed positively by independent research institute Sustainalytics. In the document, Jernhusen defines Clean Transportation as clean transportation-related infrastructure buildings and facilities which are crucial in the railway network. The company also added KPIs to underline the environmental benefits of all categories.

    “We are extremely happy and honoured to have acted as joint structuring advisor together with SHB to Jernhusen in the process of setting up their green bond platform,” says Danske’s Mac Key. “The team from Jernhusen is dedicated, and their overall understanding and integration of sustainability in their business truly show through in their market best practice green bond offering.”

    “We are very pleased to finance both energy efficiency and the development of new sustainable real estate with this successful transaction,” says Kerstin Gillsbro, CEO of Jernhusen in a press release (trans. from Swedish).


    Picture © Fer Gregory – Shutterstock

    Aline Reichenberg Gustafsson, CFA
    Aline Reichenberg Gustafsson, CFA
    Aline Reichenberg Gustafsson, CFA is Editor-in-Chief for NordSIP and Managing Director for Big Green Tree Media. She has 18 years of experience in the asset management industry in Stockholm, London and Geneva, including as a long/short equity hedge fund portfolio manager, and buy-side analyst, but also as CFO and COO in several asset management firms. Aline holds an MBA from Harvard Business School and a License in Economic Sciences from the University of Geneva.

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