China’s automaker Zhejiang Geely Holding Group on May 19 priced the first ever credit-enhanced green bond offering from an auto company globally amounting to US$400 million.

 

The Reg S five-year deal was priced at 99.754% with a coupon of 2.75% to offer a yield of 2.803%. This was equivalent to a spread of 140bp over the US treasuries, or at the tight end of the final price guidance of between 140bp and 145bp.

 

At this level, this was the lowest ever coupon US dollar bonds in Greater China auto space and achieved the tightest standby letter of credit premium.

 

In executing the deal, Zhejiang Geely undertook a series of fixed income investor meetings in Asia and Europe commencing on May 13. The transaction was announced in the morning of May 19 with an initial price guidance of 170bp area. At the time of the final guidance, the demand was in excess of US$3 billion, allowing the issuer to tighten the price guidance to between 140bp and 145bp.

 

The order book remained largely intact thereafter, allowing Zhejiang Geely to price the transaction at the tight end, or 30bp inside of the initial guidance. The final demand amounted to over US$2.3 billion from 90 accounts, with 88% of the bonds allocated in Asia and 12% in EMEA. The banks were biggest buyers of the paper as they accounted for 54%; followed by fund managers with 36%; insurance companies, sovereign wealth fund and agency 6%; and private banks and securities companies 45.

 

The bonds are issued through LTC GB Limited, a wholly-owned subsidiary of London Taxi Corporation, which in turn is wholly-owned by Zhejiang Geely, with the benefit of a standby letter of credit issued by Bank of China (London branch) and a keep well deed provided by Zhejiang Geely.

 

The proceeds will be used to finance or refinance projects that enable the design, development and production of zero-emission capable vehicles by London Taxi.