SRI Bond: ING’s €2.6bn-equivalent dual-tranche bond

IFR Awards 2018
3 min read
Robert Hogg

ING Groep set new benchmarks for financial issuers in terms of size and maturity with its Green holdco debut, while sticking firmly to its sustainability principles.

The offering achieved a rare combination in the Green format for a financial issuer of duration, currency diversification and size via a €1.5bn 12-year bond tranche and a US$1.25bn long seven-year tranche in early November. The euro tranche was the longest in the single currency, while the dollar tranche was the biggest in that currency for a Green deal by a financial institution.

The bond proceeds will fund ING’s €4.5bn eligible Green loan portfolio, which includes loans relating to renewable energy around the globe and environmentally sound buildings in the Netherlands.

“The size of the deal and the size of the Green portfolio backing it is unparalleled,” said Vladimir Mitroi, a DCM banker focusing on structuring SRI bonds at ING.

“When a bank issues a 12-year bond, it’s clear the weighted average life of the portfolio is not 12 years. So it is making a promise that this portfolio will be dynamic and stick to the highest standards in terms of allocation and impact reporting.”

ING’s Green bond framework is aligned with ICMA Green bond principles. It received a positive evaluation from ISS-oekom and was pre-certified by the Climate Bonds Initiative.

While ING has issued euro and US dollar Green bonds in opco senior format via ING Bank, the new issues from ING Groep were its first holdco Green bonds. The proceeds will go towards meeting the bank’s MREL and TLAC requirements, and fund growth in ING’s Green asset portfolio.

The dual-tranche strategy was seen as especially ambitious. The 12-year maturity is rare in the financials senior market, even in covereds where banks tend to extend even further. The previous 12-year senior bank benchmark was from Citigroup in October 2016.

ING chose that maturity, rather than a more conventional 10-year, as it already had two 2028 senior benchmarks outstanding. The scarcity value of 12-year paper and good demand for duration supported the deal.

The approach paid off as ING took advantage of improved market conditions to move pricing from IPTs by 15bp on the euro tranche and 20bp on the dollar leg. The bonds offered new issue premiums of around 15bp and 10bp respectively.

The leads on the deal were Bank of America Merrill Lynch, Credit Agricole, Credit Suisse, ING, SEB and Standard Chartered. The bonds were rated Baa1/A–/A+.

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