Year: 2022

Winner: Braskem Idesa $1.2BN Sustainability-Linked Bond

Timing was key to the success of Braskem Idesa’s inaugural sustainability-linked bond (SLB),
which not only achieved strong demand from investors but also enshrined ambitious pledges to
reduce the company’s carbon footprint.
The $1.2 billion SLB by the Mexican company was placed in October 2021, at a time when
investors were still eager for emerging market debt. It was also issued right after the company
had wrapped up long-running talks with state oil company Pemex, its main supplier, to
renegotiate its gas supply contract.
What’s more, the petrochemical industry was going strong at the time, a situation that
subsequently reversed in 2022 with an excess of supply in the market combined with weaker
global demand.
“We took advantage of the good moment we were living in 2021, compounded by the
renegotiation with Pemex, to issue the SLB,” says Danilo Garcez, Braskem Idesa’s CFO.
Demand for the bond, which wins the award for Corporate High Yield Bond of the Year,
reached $4 billion, according to Garcez, which motivated Braskem Idesa to increase the size of
the deal from an initial range of $750 million – $1 billion to $1.2 billion. As a result, the
company was able to deploy only $150 million out of a $600 million loan arranged with
commercial banks with the goal of pre-paying existing project finance debt. The 10-year 144AS senior secured notes will pay a return of 6.99%.
The most remarkable feature of the deal, however, is Braskem Idesa’s commitment to reduce its
CO2 emissions by 15% by 2028.
“I am not sure the fact that the bond was a SLB was beneficial in cost terms, but I am sure that
it helped to boost demand for the issuance. Investors today require SLB commitments from
issuers, and they are right to do so,” Garcez says. “It is an especially challenging target because
we will soon be operating at full capacity, which would normally increase our absolute
emissions levels.”
To meet the target, Braskem Idesa will invest in improving its operational efficiency by
reviewing processes and identifying and measuring where the company generates more CO2
emissions. It will also work on increasing its exposure to renewable energy sources and will
invest in a carbon capture project that is set to be announced soon. Garcez estimates that dozens of millions of dollars in investment will be required in to reach the SLB goals. “But this is a priority for the company,” he concludes. LF

Global Coordinator: Morgan Stanley
Joint Lead Arrangers, Joint Bookrunners: Credit Agricole CIB; Deutsche Bank; Itaú BBA;
Morgan Stanley
Financial Advisor: Rothschild
Issuer’s Legal Advisors: Paul Hastings; White & Case
Underwriters’ Legal Advisors: Galicia; Milbank; Ritch Mueller

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