ESG Loan: AirTrunk’s A$4.62bn sustainability-linked loan

IFR Asia Awards 2023
2 min read
Mariko Ishikawa

Growing ambition

Australian cloud computing firm AirTrunk created history in the ESG financing market in Asia with a A$4.62bn-equivalent (US$3.02bn) sustainability-linked loan that stood out for its scale, complexity, innovation and successful syndication.

The SLL was the first to include carbon usage effectiveness as a key performance indicator and the first known financing by a data centre company to incorporate a gender pay equity target.

The other three KPIs are operating power and water usage effectiveness, and gender diversity. The financing set an industry benchmark for its transparency, accountability, and ambition, having incorporated all three key sustainability topics of power, water and greenhouse gas emissions, which fits in with the company’s broader sustainability strategy including its goal of net zero carbon emissions by 2030.

Another eye-catching feature was AirTrunk’s commitment to invest all margin incentives into social initiatives in four focus areas: equal digital access, STEM (science, technology, engineering and mathematics) education, biodiversity and conservation, and innovation and research & development.

The latest SLL exemplified AirTrunk’s approach of raising its sustainability ambitions with each ESG borrowing.

The SLL was the largest such financing for a data centre globally and attracted a blowout response from over 30 lenders in general syndication, including more than 20 taking exposure to the company for the first time.

Illustrating the wide appeal of the deal, the roster of lenders included institutional investors such as BlackRock, Clifford Capital, Fukoku Mutual Life, Hong Kong Mortgage Corp and Revolution Asset Management.

Besides being one of the most widely distributed SLLs in Asia Pacific, the transaction also stood out as the largest underwritten syndicated loan from Australia since 2021. Credit Agricole, Deutsche Bank and HSBC were the sustainability coordinators, while DBS Bank, ING Bank, Morgan Stanley and MUFG were the mandated lead arrangers, bookrunners and underwriters alongside the trio.

Denominated in Australian, Hong Kong and Singapore dollars, the SLL comprises six bullet term loans, three delayed-draw term loans and two revolving credit facilities. The structure provides greater funding flexibility to the borrower for future data centre projects, while reducing financing costs.

The seven-year tranche was also unusual for an unrated Australian borrower, since investment-grade infrastructure and regulated utilities are usually the only credits that can tap borrowings longer than three to five years Down Under.

The margins of 305bp, 320bp and 350bp over the relevant base rates for four, five and seven-year tenors will be adjusted higher or lower by up to 10bp in the first year depending on the company’s performance in relation to its sustainability targets.

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