Yen Bond: NTT Finance's ¥300bn triple-tranche green bond

IFR Awards 2021
3 min read
Takahiro Okamoto

Big commitment

NTT Finance showed how to maximise ESG bond offerings, while revealing how eager Japanese investors are to support the sector.

The finance unit of telecoms giant Nippon Telegraph and Telephone, rated A/AA+/AAA (S&P/R&I/JCR), in October raised ¥300bn (US$2.63bn) from a three-part offering of green bonds, less than a year after selling the biggest domestic yen trade ever – a deal that raised ¥1trn.

This was the biggest green bond offering in the domestic market and one of the world's largest single issues of green bonds by a corporate borrower. Electricite de France had raised €2.4bn in September 2020, which was about as big as the NTT deal, but the French power producer’s issue was a green convertible bond.

Orders for NTT’s trade reached a hefty ¥900bn from 235 investors, including foreign accounts, illustrating how much money investors have set aside for ESG paper, even though issuers in the yen bond market have been relatively slow to embrace the asset class.

"Many green bond transactions are ¥10bn, so we believe the size of the deal and the scale of demand will encourage other issuers to follow with big green bonds," said a banker on the deal. He also said that some Japanese regional accounts made their first green bond investments in the trade.

The transaction consisted of a 0.001% three-year tranche, a 0.10% five-year portion and a 0.27% 10-year piece of ¥100bn each, with an issue price of 100.003 for the three-year piece and 100 for the other two.

The coupons were lower than the issuer’s previous non-green issue in December 2020, even though JGB yields had increased since then.

NTT had sold its first green bond in June 2020, but the size was a much smaller ¥40bn because the proceeds were used for specific green building projects. For the latest deal, it linked the use of proceeds to its medium to long-term business strategy.

Prior to the transaction, NTT announced a new environment and energy vision under which it aims to achieve carbon neutrality by fiscal year 2040. It also updated its green bond framework, successfully expanding eligible green projects to include 5G and fibre-to-home related investments, R&D on innovative optical and wireless networks, and renewable energy.

The company believes that migration to 5G will help bring about a low-carbon society, and that the new wireless networks offer 100 times more energy efficiency.

As the company plans to spend ¥1trn in 5G-related investments in the five years to fiscal year 2023, the inclusion of such investments in its eligible projects means it will keep selling green bonds, and indeed it went on to sell euro green bonds in December.

Nomura was structuring agent and a lead manager with Mizuho, Mitsubishi UFJ Morgan Stanley, SMBC Nikko and Daiwa.

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