This Wednesday, BBVA successfully completed its second green bond issue in the wholesale debt market - the first one was in May 2018 – for the same amount, €1 billion, and with the same instrument and maturity. The transaction drew a very positive reaction from investors, with book orders exceeding €2.7 billion, a figure similar to the one reached last year. Excess demand made it possible to lower the price to mid-swap plus 103 basis points, from the initial range set at 120-125 basis points. This price entails a new zero new issue premium, just as in its first green bond issue.
BBVA’s 2018 green bond also reached €1 billion - above the standard for this type of bond issues, €500 million to €750 million - and was the largest amount for a eurozone financial institution at the time.
The bond issued today is senior non-preferred debt with a seven year maturity and amount of €1 billion. It is the first green bond in 2019, the second of this kind of instrument this year (following the €1 billion issue in February) and the fourth so far this year. The initial price was 120-125 basis points above the mid-swap rate, but excess demand made it possible to lower the price to mid-swap plus 103 basis points. BBVA, Commerzbank, HSBC, ING, Natixis and UBS are the underwriting banks.
The bond book received nearly 200 high quality, granular orders. 43 percent of the investors are from France; 18 percent from Germany and Austria; 13 percent from Spain; 10 percent from Italy; five percent from the U.K. and Ireland; four percent from Belgium, the Netherlands and Luxembourg; four percent from Switzerland; and three percent from Nordic countries. In terms of the breakdown by type of investor, 60 percent are socially responsible investors (SRIs); 67% pèrcent are asset managers; 17 percent are banks; 13 percent are insurance companies and pension funds; and three percent are other types of investors.
This issue is part of the BBVA Group’s financing plan, which calls for issuing €2.5 billion to €3.5 billion of senior non-preferred debt this year in order to continue complying with the MREL requirement. BBVA already meets this requirement, which was published in May 2018, and its strategy is to continue refinancing maturing senior debt and covered bonds by issuing debt permitted under this regulation.
The goal of a green bond is to finance projects that contribute to environmental sustainability, such as renewable energy, energy efficiency, waste management, water treatment or access to essential needs and services, such as housing or inclusive finance. The financing of the first green bond allowed BBVA to reduce its carbon footprint by nearly 275,000 tons in 2018.
The green bond issued this morning is part of a framework for sustainable bond issues, tied to the United Nations Sustainable Development Goals. This framework is in response to investor interest in the fight against climate change. It also contributes to BBVA’s climate change and sustainable development strategy, through which the bank plans to mobilize €100 billion in green financing, sustainable infrastructure, social entrepreneurship and financial inclusion from 2018 to 2025.
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