JSW Steel Ltd today announced that it has raised $1 billion by issuing Sustainability Linked Bonds (SLBs) in the overseas market. The company said in a statement that it has become the first company in the steel sector globally to issue a US-denominated SLB.
"The company raised a total of $1 billion in the US bond markets through a RegS/144A issuance which was subscribed by high-quality institutional investors across Asia, Middle East, Europe and the US," said JSW Steel.
The issuance comprised two tranches of 5.5 years and 10.5 years, each for an amount of $500 million.
"The 10.5-year tranche was issued as an SLB where JSW Steel committed to achieving an ambitious target of 1.95 tonnes of CO per tonne of crude steel produced (tCO2/tcs), by March 2030, representing a 23% reduction from its 2020 levels," JSW Steel said in a statement.
As per the SLB terms, if the company is not able to meet these targets by March 2030, the pricing on the bonds will be stepped up by 37.5 bps (basis points) for the residual life of the bonds.
The SLB structure helped JSW Steel attract ESG (environmental, social, and governance) focused funds thereby giving it a size and price benefit.
The SLB is a win-win for both issuers as well as investors - it benefits investors by giving them an avenue to invest in socially responsible companies while providing the right incentive structure to companies to improve their ESG performance and diversify their resource base for long term financing.
The issuance, which mobilised $1 billion across both tranches, was handsomely oversubscribed.
The 10.5-year tranche, which was priced at 5.05%, achieved a greater tightening of 45 bps as compared to the 5.5-year tranche that was priced at 3.95% and achieved a tightening of 42.5 bps, against the initial price guidance.
The proceeds of the issue will be used by JSW Steel for funding capex plans as well as for refinancing its debt. The company is rated Ba2 (Positive) by Moody's and BB- (Positive) by Fitch.
"The target set by JSW is significantly steeper than that committed as per India's Nationally Determined Contributions ("NDC") and is aligned with the Sustainable Development Scenario ("SDS") pathway by way of targeting a 42% reduction of CO2 emission intensity from the base year of 2005," said Seshagiri Rao, JMD and Group CFO, JSW Steel.
"With regards to adoption of disruptive technology towards green steel production, JSW is already operating a 100TPD capacity Carbon Capture and Utilization ("CCU") project where the captured and refined CO2 is used in the beverage industry. Adoption of this technology at a very early stage gives us a head-start in our plans to scale up its utility in conjunction with BF-BOF in the future," he added.
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