On September 8, the Brazilian pulp company Suzano concluded a new issue of long-term bonds with conditions linked to the fulfillment of social and environmental goals, the so-called “Sustainability-Linked Bonds” (SLB). The funding was completed with the issuance of US$500 million in international bonds, but it attracted a total demand of US$3.4 billion, or 6.8 times the size of the operation.
The bonds issued will mature in 2028, with a coupon of 2.5% per year. The total return to investors (yield) is 2.70% per year – the lowest rate in history for a Brazilian company issue within seven years, according to banks that participated in the transaction. The final allocation obtained 60% of investors with an ESG (environmental, social and corporate governance) profile.
In this operation, the two goals set by Suzano are to reduce, by 12.4%, the intensity of water collected in industrial operations, from the reference value of 29.8 m³/t in 2018 to 26.1 m³/t by 2026, and the expansion of the presence of women in leadership positions from the goal of 16% in 2019 to 30% by 2025.
Suzano was the first company in the Americas and the second company in the world to issue SLBs. It was also the first global organization to carry out an issue accompanied by a document describing the operation to investors, the so-called Framework.
Since 2020, the pulp company has carried out four operations (three original issues and one reopening), with a total funding of US$ 2.75 billion. With the new operation, in addition to previous issues in the formats “green bonds” and “Sustainability-Linked Loan”, Suzano already has 39% of its debt linked to ESG commitments. At the end of 2019, this share was only 9%.
If the company does not meet the targets proposed in this operation, the remuneration amount to investors holding the securities will be increased by a rate of 25bps for each commitment not fulfilled, which may total an additional 50bps.