Worley opens sustainability bond market for Australian companies
By John Weavers
MELBOURNE, June 3 (IFR) – Australian engineering firm Worley, rated BBB (S&P), broke new ground on Tuesday with a sale of senior unsecured sustainability-linked Eurobonds of € 500m (€ 611m) US dollars) with no growth over five years.
Not only is this first public offering of Worley bonds, it is the first public SLB of an Australian company, the largest issue size and the lowest coupon of any company five-year euro issue. Australian BBB rated and the first time an issuer anywhere has printed its inaugural deal in this format.
SLB structure means the global provider of project and asset services to energy, chemicals and resources faces substantial penalties unless they meet aggressive KPIs to reduce its carbon footprint.
“Choosing an SLB was an easy decision as it aligns our funding with the group’s sustainability ambitions across all of our technically complex projects,” said Craig Busch, senior group treasury director.
“We have historically entered the private placement market in the United States, but the purchase of Jacobs ECR in 2019 has boosted our European operations and provided the opportunity to enter the Euro market as the first drawdown of our US $ 2 billion EMTN program at attractive interest of less than 1%. rate for five years.
Europe is at the forefront of the SLB market, which has taken off this year, contributing so far to 16% of all European ESG-labeled bonds in 2021.
Unlike green bonds, which tend to be sold by issuers with heavy green spending, such as renewable energy, utilities, and sustainable construction companies, sustainability bonds are forward-looking and investment-based instruments. performance.
The latter are increasingly favored by many green investors who fear that the “product use” model used for most green bonds is susceptible to greenwashing.
An impressive and persistent order book of over € 1.7 billion provided enough traction to price Worley’s June 9, 2026 0.875% at a yield of 0.99%, 15bp below 140bp in the area of the initial prices envisaged at mid-swaps plus 125bp.
Asset managers bought 79.9%, banks and financial institutions 10.6%, insurance and pension funds 3.1%, central banks and official institutions 2.6% and others 3.7% .
German and Austrian accounts were allocated 35%, United Kingdom and Ireland 30.3%, Switzerland 6.1%, France 4.6%, Nordics 3.6%, Benelux 3.5%, other Europe 12.7 %, Asia 3.4% and others 0.9%.
French liquid gas specialist Technip Energies, with an identical BBB (S&P) rating, has been identified as the most relevant company to issue a first senior unsecured seven-year Eurobond of € 600 million, also at 125 bp on mid-swaps, May 21.
BNP Paribas and HSBC were active bookkeepers on the transaction while Bank of China, Standard Chartered Bank and Wells Fargo were passive bookkeepers and JLMs.
Worley (formerly WorleyParsons) is the 15th largest issuer of SLBs, making the format ideal for other Australian companies that don’t have enough green assets to turn them into green bonds.
Several Australian companies, including Wesfarmers, Adelaide Airport, Queensland Airport, Port of Newcastle, Frasers, AGL, Downer and G8 Education have taken out bilateral or syndicated loans related to sustainability.
“It is a natural progression for companies like these to enter the sustainability bond market given the effectiveness of KPI goals in communicating their commitment to ESG goals, without raising funds for projects. specific, ”said Brad Scott, Managing Director and Head of DCM. at the Bank of China in Sydney.
Scott described Worley’s business as a “turning point” in expanding the ESG financing frontiers open to APAC companies.
SLB supports Worley’s intention to reduce its carbon footprint, with Sustainanalytics reporting that the new bonds align with the 2020 Sustainability-Linked Bond Principles published by the International Capital Market Association in June last year.
“Worley is committed to achieving zero net greenhouse gas emissions from Scope 1 and Scope 2 by 2030 and proactively supporting our customers to reduce emissions from their projects and assets,” said Chris Ashton, CEO of the company.
Rather than a coupon markup, Worley’s bond structure incorporates a one-time 25bp premium payment at maturity, or early redemption, if it fails to reduce its absolute CO2 emissions from scopes 1 and 2 at least 50% by October 2025 compared to a 2020 baseline.
The one-way penalty structure, if KPIs are not factored in, contrasts with Australian sustainability-linked loans which come with two-way, incentive and penalty risks.
“We are still at the stage of market development where we are finding out which structures work best,” said a European banker from DCM.
“But that’s one of the attractions of the SLB format, that there is flexibility, and if you want to have a short maturity, but a significantly distant target, a premium might be better suited than a coupon stage. . “
(Reporting by John Weavers; Editing by Vincent Baby)
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