Sgcib's Green Deal for London Taxi Company Hailed
Total Page：16
File Type：pdf, Size：1020Kb
capiTal markeTs | TeAM oF THe MonTH SGCIB The glaring issue now facing LTC is that, from 2018 onwards, London will introduce SGCIB’S Green deal an ‘ultra-low emissions zone’, imposing much stricter limits on emissions from city for london TaxI taxis. So the company is building a new plant near Coventry in the Midlands region to Company haIled make a new low-emission version of its pop- ular TX4 taxi from the second half of 2017. Team of the month The TX5, as it will be called, will have a 400-kilogram battery that can be recharged •••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••• •••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••• in transit by a small petrol engine. Geely When China’s Zhejiang Geely Holding Group, owner of LTC, decided to invest announced it would invest £250m £250m in its UK manufacturing capacity for low-emission black cabs, a green ($353.5m) in the project, thereby providing the rationale for a bond issue. bond issue seemed the ideal vehicle. The company chose Société Générale Corporate “While subsidiary Geely Automobile & Investment Banking as joint global coordinator for a deal that has tapped into Holdings is listed in Hong Kong, Geely investors’ growing interest. Edward Russell-Walling reports. Holding Group is unlisted,” says Andy Liu, SGCIB managing director, debt capital mar- ket (DCM) origination, China. “Geely Hold- ing Group is a frequent issuer onshore, but Green bonds are GrowinG in popularity has not issued offshore.” and a Chinese expansion story will always catch the eye. Combine them with the iconic a green lighT London black taxi and you have a bond issue While some may associate China with heavy guaranteed to command attention. The first pollution, Li Shufu is on record as saying green deal from China’s auto sector links all how much the Chinese now value environ- these elements, and Société Générale Corpo- mental consciousness, and the Chinese rate & Investment Banking (SGCIB) was a government is going for green with some joint global coordinator. gusto. This was clearly one of the main driv- The issuer of the $400m five-year bond, ers of the deal. with a 2.75% coupon, was London Taxi Com- “From the perspective of the parent, pany GB. Its parent is China’s largest pri - China is very serious about moving to a low- vately owned car manufacturer, Zhejiang carbon economy,” says Jonathan Weinberger, Geely Holding Group, based in Hangzhou in SGCIB head of capital markets engineering. Zhejiang province. ‘Geely’ means ‘lucky’ in “It is at the fore of national efforts to seed a Mandarin, and the company has certainly green bond market, and has introduced its enjoyed an extraordinary rise from relatively own green bond standards.” humble beginnings. Three of the five biggest green bonds issued in 2016 have come out of China, Mr rapid journey Weinberger notes. Two came from Shang- The business was set up by Li Shufu in 1986 hai Pudong Development Bank – a $3bn to make refrigerator parts, which it did so debut in January (the largest ever Asian successfully that, in 1994, it began produc- green bond) with a $2.3bn follow-up only ing first motorcycle parts and then motor- weeks later, and a $1.5bn deal from China cycles. It introduced the first Chinese Industrial Bank. scooter engine, and within two years Part of Geely’s green commitment is that became the market leader. It launched its it wants 90% of sales to be electric battery first car in 1998 and in 2015 sold more than and hybrid vehicles by 2020. Domitille Mou- 1 million vehicles. las, senior advisor, cross-product green From the perspective oF In 2007 Geely formed a joint venture structuring, in SGCIB’s positive impact with the UK’s Manganese Bronze Holdings, finance team, underscores the point, saying: the parent, china is very maker of London black cabs, to start manu- “This was a great opportunity for Geely to serious about moving to facturing the taxis in China. Geely acquired communicate directly with investors about Volvo Car Corp from Ford in 2010, and the its commitment to a low-carbon economy.” a low-carbon economy. company has prospered under its owner- it is at the Fore oF ship. Finally, it bought Manganese Bronze in gaining TracTion 2013, after the company had gone into Until two or three years ago, selling green national eFForts to administration, renaming it London Taxi bonds was more of a public relations exercise seed a green bond market Company (LTC). With a change of manage- for the issuer, a statement of intent, but now ment, the business has been turned around green bonds are also gaining more traction Jonathan Weinberger relatively quickly. with investors. 24 | The Banker | July 2016 TeAM oF THe MonTH | capiTal markeTs sgcib SGCIB: (left to right) Han Zhang, Yann Zhang, Laurent Morel, Sammie Lau, Andy Liu, Jack Ang; Alain Stalker, Jonathan Weinberger and Marjolaine Druart “now green funds have started to become Mr Liu. “By early May we were ready to go “It attracted a lot of interest from Asia,” more popular among investors, as another out with a roadshow.” says Jack Ang, a director at SGCIB’s Hong tool in their investment suite,” says Alain The roadshow took in Singapore, Hong Kong bond syndicate. “Bank treasuries took Stalker, a SGCIB managing director in DCM Kong, Frankfurt and London, and a five-year a huge chunk. Quite a number of fund man- syndicate (emerging markets). “There is more $400m Reg S senior unsecured deal was agers put in orders, since there has been a tangible liquidity from dedicated investors priced a week later. Investors wanted more lack of supply in the SBLC space, and other and we see the format extending across a clarity on how LTC would manage the leap fund managers were buying for dedicated wider range of issuers, including from emerg- from its current annual production levels of green portfolios.” ing markets such as Turkey and India.” 1500 vehicles to 36,000 from the new fac- The green aspect attracted a good level of Those investors are becoming increas- tory. The answer was that it plans to build an interest from europe as well, according to ingly discerning about what does or does not export business. Mr Ang. “The quality of the order book was constitute a green bond, and compliance “There were also a lot of roadshow very high, with the majority of orders from with the International Capital Market Asso- questions about LTC and its financials,” real money accounts – and the quality didn’t ciation-administered Green Bond Principles says Sammie Lau, a SGCIB associate in drop, even after tightening,” he says. ensures the best chance of success. These DCM for China. “It’s a relatively small com- After final guidance of 140bps to 145bps, aim to promote integrity in the market by pany, and there were enquiries about its the issue was priced at 140bps over – the laying out voluntary guidelines on matters debt servicing capability.” tightest SBLC bond ever, says Mr Ang. With such as use and management of proceeds orders of $2.3bn, the deal was nearly six and reporting, and they recommend trans- keepwell and sTandBy times oversubscribed. Asia took 86% of it, parency and disclosure. Some comfort, and an enhancement to and europe, the Middle east and Africa the In Geely’s case, the proceeds would be credit quality, was provided in the form of a balance, while banks got 54% and fund man- used to finance, or refinance, projects ena- keepwell letter from Geely. While falling agers 36%. bling the design, development and produc- short of a guarantee, keepwell deeds promise “The Chinese presence in international tion by LTC of zero-emission-capable financial support for a subsidiary over a DCM is growing, and will continue to grow vehicles. “We discussed the Green Bond specified period. More persuasively, the due to the scale of their economy,” says Principles with the borrower, introduced bond also benefited from a standby letter of Mr Weinberger. “And it’s interesting that the concept of second party opinion provid- credit (SBLC) provided by the London China and India are willing to take on the ers and helped the company to engage with branch of Bank of China. Moody’s rated the leadership mantle in achieving a cap of 2°C them,” says Mr Weinberger. bond A1, mirroring its Bank of China rating. above baseline.” Mandates as joint global coordinators Geely’s five-year paper was trading at Ms Moulas agrees. “Six months after the were awarded to Bank of China, Bank of about 120 basis points (bps) over Treasuries, Paris Agreement [on climate change], hav- America Merrill Lynch, Barclays and SGCIB, and it was thought that a 50bps premium to ing China lead the green bond market is very and preparations began in March. “Bond that would be a good place to start. The promising,” she says. “It will foster more execution takes two months, including transaction was launched with an initial financial sector participation in funding the working on the green bond certificate,” says price guidance of Treasuries plus 170bps. transition to a greener economy.” July 2016 | The Banker | 25.