Swiss Franc Bond: Holcim’s SFr425m dual-tranche sustainability-linked bond

IFR Awards 2022
2 min read
Jonathan Penner

Paving the way
Breaking new ground in the Swiss franc bond market, building materials company Holcim issued the first sustainability-linked bond in the currency at the beginning of the year.

Combining a 4.75-year tranche referencing Holcim’s 2025 CO2 reduction target and a 10-year tranche referencing its 2030 target, the deal marked a vital step for ESG in the Swiss bond market and was met with strong interest from investors.

The company had issued an SLB in euros in November 2020 and broadly followed the same template for this Swiss version, though it added a 2025 KPI. As for the structure, the bonds have a maturity bonus of 37.5bp and 75bp respectively if the KPIs are not met.

The deal came in the second week of January, with Holcim pricing SFr275m October 2026 and SFr100m January 2032 notes. It added SFr50m to the October 2026s the following day.

Leads BNP Paribas, Commerzbank, Credit Suisse and UBS opened books on January 12, swiftly printing the shorter tranche at 47bp over swaps and the longer one at plus 67bp. Although the longer note came only at the wide end of guidance – the shorter one landed at the tight end – both tranches priced in line with Holcim's secondary levels as investors welcomed the new structure.

An all-Swiss group of buyers took part, headed by asset managers, bank treasuries and financial services which took 59% of the short tranche and 49% of the longer, while insurers and pension funds took similar 28% and 30% portions, and retail and private banks 13% and 21%%. ESG-specific investors took around 30% of the deal.

"The bonds were an important step for the company and the industry, bringing sustainability-linked bonds to our domestic market with ambitious targets and a simple, efficient structure," said Leila Sassi, head of sustainable finance at Holcim.

Holcim (Baa2/BBB) intends to make 40% of its outstanding debt sustainability linked by 2025. As of the end of 2022, it was at 34%, with another SFr1.4bn-equivalent to go to reach that level.

The KPIs are geared towards reducing carbon emissions from a 2018 baseline. This single-focused KPI for both tranches, and penalties at maturity if the targets are missed, ensured structural simplicity.

The deal was followed less than two weeks later by the second SLB in the Swiss market, from renewable energy company Axpo.

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