SK hynix, a South Korean supplier of dynamic random-access memory chips and flash memory chips, on January 13 priced a green bond amounting to US$1 billion to invest in environmentally-friendly business projects to accelerate its environmental, social and governance (ESG) management. It is the first global semiconductor memory manufacturer to issue a green bond.
The Reg S/144A 10-year offering was part of the total US$2.5 billion bond that the company raised in the international debt capital markets, which generated a strong investor demand. The bond was priced at 98.988% with an interest rate of 2.375%, or a spread of 140bp over the US treasuries. This was in line with the final price guidance and 40bp tighter than the initial price guidance of 180bp area.
The green bond tranche attracted a total demand of US$5.4 billion from 235 accounts, enabling the company to upsize the deal from an initial amount of US$500 million. More than half of the bond, or 53%, was distributed in the United States while 31% was sold in Asia and 16% in EMEA. By type of investors, asset and fund managers were the biggest buyers of the paper with 68%, followed by insurance companies and pension funds with 24% and banks 8%.
With the funds raised by this bond issuance, SK hynix plans to invest in environmentally-friendly projects that are associated with water quality management, energy efficiency improvement, pollution prevention and ecological environment restoration. In particular, The company plans to prioritize the establishment of a new state-of-the-art wastewater disposal plant and a water recycling system as water management is extremely critical in the semiconductor industry.
SK hynix will also proceed with various projects, including the development of low-power solid state drives (SSDs), in order to reduce carbon emission throughout the IT ecosystem in general. The company thrives to gradually replace hard disk drives (HDDs), which are one of the representative storage devices, with SSDs. It says the effort will not only signal the improvement of product technology overall, but also contribute to carbon emission reduction significantly, resulting in a noticeable social value creation in the environmental area.
Like other global IT companies such as Apple and Taiwan Semiconductor Manufacturing Company, SK hynix joined RE100 last year, along with the other affiliates of SK Group – one of the first companies to do so in South Korea. RE100 is a global initiative that brings together the world’s most influential businesses driving the transition to 100% renewable electricity.
Eco-friendly
Commenting on the green bond offering, SK hynix head of finance Hyuk Joon Chang says the successful issuance is the result of the global investors’ recognition of the company’s proactive movement to achieve eco-friendliness, including SK hynix’s participation in RE100. “As a semiconductor memory manufacturer leading ESG management, SK hynix will continue to contribute to creating social value as well as economic value by securing sustainable sources for the growth of the company,” he adds.
In October 2020, SK hynix announced a financial story that envisions the fortification of its business competitiveness with both DRAM and NAND Flash segment, while engaging in social value creation via ESG activities simultaneously.
The other tranches in the US$2.5 billion fund raising include a three-year bond amounting to US$500 million, which was priced at 99.806% with an interest rate of 1%. This was equivalent to a spread of 85bp over the US treasuries, which was in line with the final price guidance and 30bp inside the initial price range of 115bp area. The remaining tranche was a five-year bond amounting to US$1 billion, which was priced at 99.861% with an interest rate of 1.50%. This represented a spread of 105bp over the US treasuries, which was also in line with the final price guidance and 35bp tighter than the initial guidance of 140bp area.
The three-year bond garnered a total order book of US$2.85 billion from 150 accounts, with 43% allocated in the US, 39% in Asia and 18% in EMEA. Asset and fund managers drove this deal as they accounted for 74% of the bond, while the insurance companies and pension funds took 17%, banks 8%, and private banks and other investors 1%.
The five-year bond generated a total demand of US$4.10 billion from 220 accounts with 51% sold in the US, 34% in Asia and 15% in EMEA. Asset and fund managers were likewise the biggest buyers with 76%, followed by insurance companies and pension funds with 15% and banks 9%.
BNP Paribas, BofA Securities, Citi, Credit Agricole CIB, Credit Suisse, HSBC and J.P. Morgan were the joint bookrunners and lead managers for the transaction.
