Nordea Returns to SLL Format

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    Stockholm (NordSIP) – Nordic banks seem to be racing to explore new sustainable fixed-income structures. At the same time as Swedbank conducted its inaugural social bonds issuance, Nordea returned to its Sustainability-Linked Loan (SLL) bonds format with a new €1 billion security maturing in 2026.

    The Transaction

    The SLL bonds pay a 4.375% coupon and can be called after two years, on September 6th, 2025. The securities were priced at a 99.822 discount, 68 basis points (bps) over mid-swaps, down 22bps from initial price thoughts (IPTs). At issuance, the securities provided investors a yield 4.39%, 132bps over the underlying German government bund.

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    Strong demand from 129 investors swelled final books at reoffer to €1.85 billion. Sectorally, asset managers represented the largest investor group, purchasing 67% of the bonds. The remaining went to pension funds and insurance companies (15%), banks (10%), central banks and official institutions (6%) and others (2%). Geographically, investors domiciled in France were dominant, investing in 35% of the securities, followed by UK and Ireland (13%), Benelux (12%), German, Austrian and Swiss investors (11%), southern European investors (10%), investors domiciled in Asia (8%), Nordics (5%) and other miscellaneous investors (6%).

    Bank of America Securities, JP Morgan, Nordea, Societe Generale, and UBS acted as joint lead managers on this transaction. The SLL bonds are senior non-preferred notes constituting direct, unsecured, unguaranteed and unsubordinated obligations of the Issuer. The underlying contract is subject to Finnish law.

    Nordea’s Sustainability-Linked Loan Bonds

    This is not the first time that Nordea issued bonds under the SLL framework, which was published at the end of the second quarter of 2022. In September, it first came to the markets with an inaugural issuance of SLL SEK/NOK 4.1 billion.

    According to Nordea, the framework is designed to allow investors to help support the transition to a low carbon economy. Proceeds from the bond are used to finance or refinance sustainability-linked loans that have been selected to be part of the SLL Funding asset pool. Loans in the pool must be aligned to the Sustainability-linked Loan Principles, contribute to combating climate change (e.g.:through the reduction of greenhouse gas emissions or energy consumption), and have key performance indicators (KPIs) and targets that are considered “material” and “ambitious” by an external reviewer.

    The suitability of loans is assessed by external provider ISS ESG, which also reviewed the funding framework. A cross-functional Nordea committee regularly reviews the asset pool, and if a sustainability-linked loan no longer complies with the required criteria, it will be removed from the pool. Nordea will also report annually on the performance of the underlying companies and KPIs on an aggregated basis.

    Image courtesy of Nordea
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