The nascent sustainability-linked loan financing bond market has taken a notable step forward with its first US dollar issue, adding impetus to what could prove to be a significant channel for banks around the world to fund their growing portfolios of KPI-linked loans. Emirates NBD’s US$500m five-year SLLB on Tuesday also marked the debut offering of the use-of-proceeds instrument by any bank outside Europe and was the first deal in the ESG bond format to be fully aligned with new International Capital Market Association/Loan Market Association guidelines. The Dubai-headquartered bank made its entry “to set the pace and be a market leader globally, showing ENBD’s commitment to sustainability and to providing financing solutions that are ... state of the art and provide investors with a new way of investing into sustainability”, said a source close to the oversubscribed deal, which attracted some US$1.8bn of orders. That enabled lead managers Emirates NBD Capital, First Abu Dhabi Bank, HSBC, Industrial and Commercial Bank of China and Societe Generale to price the transaction at 90bp over Treasuries, 35bp inside initial price thoughts. “We had a lot of interest from investors who wanted to hear about the SLLB framework, given how new it is,” said a banker at one of the leads, adding that investors’ focus was on understanding the SLLs being financed – particularly the robustness of their sustainability targets. A high level of participation by dedicated ESG investors was also notable. “We did actually have quite a lot of Article 8 [medium green under the EU’s Sustainable Finance Disclosure Regulation] funds in there,” said a banker at another lead. Asian ESG buyers also participated, according to the source close to the transaction. ENBD’s deal was its first under the SLLB framework that it announced and began marketing to investors two months ago.Broader adoption The SLLB format has been pioneered over the past two years by Nordea and Credit Agricole. ENBD’s arrival could signal broader adoption – especially with Bank of China having experimented with an earlier variation of the format. At the launch of the ICMA/LMA guidelines in June, Alban de Fay, head of fixed-income SRI processes and senior portfolio manager at Amundi and vice-chair of ICMA’s sustainable finance principles, noted “very strong interest” from banks in using SLLBs to refinance SLLs. KPI-linkers now represent around a third of new corporate loan volume. An ICMA survey of potential buyers earlier this year found “quite a clear answer from investors saying that they are willing to look at these kinds of investments, even if at this stage they may have some questions on how they could integrate [them] in their strategy”, de Fay said. Expansion could include other banks in the Middle East, where SLLs have seen notable growth. The format “is a very compelling option for issuers with sophistication internally and sufficient loans of appropriate quality", said one CEEMEA ESG banker. “It’s not for everyone, but it’s going to be helpful.” Some investors’ country ESG restrictions could cap demand, however. A portfolio manager at one major European institution said they were unable to participate in the ENBD deal as its proprietary framework excludes the UAE. ENBD seems likely to return to the format. While it has some US$150m of proceeds still to allocate from the new issue and the rest going to three loans to real estate and services companies, it also boasts “a very large pipeline of state-of-the-art SLLs for clients that have very promising sustainability agendas and strategy”, according to the source close to the transaction. “Having an issuance which was welcomed by the market and almost four times subscribed gives [ENBD] really an incentive to look at potential future issuances,” the source sai

Alibaba Group Holding raised US$5bn-equivalent from a dual-currency bond trade on Tuesday, marking its return to the offshore market after a three-year absence. This was the e-commerce giant's first international bond offering since China ended its regulatory crackdown on the technology sector in 2023. The deal was split between a US$2.65bn three-tranche US dollar trade and a debut Rmb17bn (US$2.35bn) four-part Dim Sum. Alibaba priced a US$1bn 4.875% 5.5-year note at Treasuries plus 65bp, a US$1.15bn 5.25% 10.5-year at 90bp and a US$500m 5.625% 30-year at 105bp. The 2030s, 2035s and 2054s priced at 99.838, 99.649 and 99.712 to yield 4.909%, 5.294% and 5.645%, respectively. It also sold an Rmb8.4bn 2.65% 3.5-year note, a Rmb5bn 2.80% five-year, a Rmb2.5bn 3.10% 10-year and a Rmb1.1bn 3.50% 20-year, all priced at par. Investors piled into the rare deal, which drew combined orders of US$22.5bn-equivalent at the peak. A banker on the US dollar piece said it was the largest order book he has seen in the past two years. Orders for the US dollar trade peaked at US$18.2bn, significantly higher than the US$8.6bn peak book that Meituan, a Chinese food delivery and logistics company, drew for its US$2.5bn dual-tranche note in September. A second syndicate banker on the US dollar piece said Alibaba benefited from better credit ratings at A1/A+/A+ while Meituan is Baa2/BBB+/BBB. “They haven’t issued any bonds since 2021, and this time the size is relatively smaller, so there is some scarcity value,” said the second banker. “There has been a lack of supply from Chinese private sector names for a long time, which contributed to the strong demand.” Alibaba senior managers made it clear during investor calls on Monday that they aimed to split the US$5bn-equivalent size evenly between the two currencies. The US dollar tranches were only about half the size of earlier deals, including the previous US$5bn four-tranche issue in 2021. The company could easily have raised US$5bn in US dollars but it decided to include the Dim Sum to reduce the blended funding cost, said bankers. The inaugural offshore renminbi offering also helped expand its investor base and better match the currency of its debt and assets. “A lot of Asian IG names have done local currency deals this year, like Singapore dollar and Aussie dollar. For Alibaba, it’s natural to look at renminbi, which offers a low funding cost,” said a banker on the Dim Sum tranches. Alibaba is the first privately owned corporate to print Dim Sum notes with 10-year and 20-year tenors this year. Airport Authority Hong Kong, Temasek Holdings and MTR Corp issued such long tenors earlier this year, but are all state-backed entities. The banker on the Dim Sum tranches said Alibaba is a “high-quality, noticeable name”, which gave the leads confidence. He said the "perfect" combination of short-dated and longer-dated options ensured smooth execution. The higher-yielding 10 and 20-year tranches saw allocations of 11%–14% to EMEA investors. The two short-dated tranches were bought by Asian investors only. Uncertain rates The bonds will be used to refinance a US$2.25bn 3.60% bond due on November 28. The remaining proceeds will be used for share repurchases. Senior managers said on the investor call that they aimed to maximise Alibaba's capital structure. The company has a relatively low leverage ratio and is willing to raise debt to contribute to its shareholder return programme, they said. Alibaba spent US$10bn on share repurchases in the first half of the current fiscal year to March and has another US$22bn to be used for share buybacks by the end of March 2027. Part of the proceeds from a US$5bn seven-year put five convertible bond in May also funded share buybacks. Alibaba decided to sell US dollar bonds despite the high funding cost as Asian investment-grade names are trading at tight levels and uncertainty has increased over future rate cut

SF Holding is set to raise HK$5.38bn (US$749m) from a smaller-than-expected Hong Kong listing, as investor enthusiasm wanes over the effects of China’s economic stimulus measures. Books were multiple times covered when they closed at 12pm locally on Friday. The leads told investors that SF plans to price the deal at HK$34.30 per share, the mid-point of the HK$32.30–$36.30 marketing range and a 23% discount to its A-share close of Rmb41.16 (HK$44.20, US$5.68) on Friday. The Shenzhen-listed Chinese logistics giant had considered selling around 5% to raise at least US$1bn but decided to sell fewer shares as its A-share price has softened since hitting recent highs on the back of the stimulus package announced in September, according to people with knowledge of the matter. SF’s shares closed at Rmb42.32 on Monday, a day before bookbuilding started, 14% below the 52-week high of Rmb49.38 on October 8. “The stock has been dropping and, on top of it, SF will need to sell its H-shares at a discount to the A-shares. It’s understandable why the company would want to sell less,” said one of the people. Investors asked for more than the 19% discount to A-shares that Shenzhen-listed Chinese home appliance giant Midea Group offered in September on its HK$35.7bn Hong Kong listing. SF is in a much more competitive industry, and the stock markets in Hong Kong and China have pulled back after the recent strong runs. “The fever is largely over and investors have started looking at Chinese issuers’ fundamentals again,” said a banker away from the deal. Beijing has introduced a spate of monetary stimulus measures since late September in an effort to revive the economy and its financial markets. But mainland China's and Hong Kong's equity markets have fallen around 10%–15% from their early October highs as investors were disappointed by the lack of bolder policies. Bigger discount SF marketed 170m primary H-shares, or about 3.4% of the enlarged share capital. The range represented a discount of as much as 29% to the A-share close on Monday. SF drew 10 cornerstone investors with commitments of US$204.8m. Oaktree Capital Management, Sino Land and WT Asset Management are each investing US$25m, while China Pacific Insurance (Group), Xiaomi, Infini Global Master Fund and Chow Tai Fook committed US$20m each. The others are Morgan Stanley International (US$19.8m), Ghisallo Fund Master (US$15m) and Wisdomshire Asset Management (US$15m). The company last month reported strong third-quarter earnings, but analyst Xinyao Wang, who publishes on research portal Smartkarma, said in a prepricing report that if the pricing is at the lower end of the range, the safety margin for investors will be higher. According to Wang, SF is under financial pressure mainly because of its asset-heavy development model with its own aircraft, airports and logistics industrial parks. Meanwhile, its dominance in the high-end market for express delivery services is facing pressure from other players such as JD Logistics. Revenue for the third quarter was Rmb72bn, up 12% from a year earlier, while net profit rose 35% to Rmb2.8bn. SF shares will start trading in Hong Kong on Wednesday. Goldman Sachs, Huatai International and JP Morgan are sponsors. The company plans to use the proceeds to expand its international business and strengthen its logistics network in China, as well as for research and development.

Yondr Group is preparing to make its debut in the Asian syndicated loan market with a deal that is expected to herald a slew of debt financings for data centre developments in Malaysia. The country is on the cusp of a data centre construction boom, with operators including AirTrunk, EdgeConnex, GDS Holdings, WinTriX DC Group's Bridge Data Centres, Logos, Microsoft and a unit of Singapore Telecommunications all looking to build facilities. The around US$835.5m financing for Yondr will support the buildout of one of several phases planned for the construction of a 300MW facility in the southern state of Johor, the largest hyperscale data centre campus in South-East Asia. The rise of artificial intelligence and strong demand for related infrastructure have increased the scale of data centres, with multiple phases of construction. Operators have been largely dependent on private equity funds for capital but are diversifying their financing sources to meet growing demand, according to Joel Cheah, chief financial officer for APAC at Vantage Data Centers. “As the industry is so capital-intensive, operators are looking at alternate forms of financing, including debt financing, private credit, bond takeouts and other alternatives to raise incremental capital for business growth,” he said. This year has already seen a couple of loans raised for data centres in Malaysia. In October, Australia's AirTrunk wrapped up a S$530m (US$402m) sustainability-linked loan to develop part of its JHB1 data centre. In May, Princeton Digital Group raised a US$280m-equivalent ringgit-denominated green loan for the first phase of its hyperscale campus in Johor’s Sedenak Tech Park. It is no surprise Johor has become the hotbed of data centre activity as neighbouring Singapore has massive data consumption but faces space constraints. Moreover, costs for land, power and construction in Johor are lower than in the city state. Around 434MW of capacity was under construction at the end of June and 1.23GW was planned at the time, according to real estate firm Cushman & Wakefield. An industry executive estimated the capital expenditure required to be US$10m per megawatt, which would add up to US$12.3bn at the end of June. Speed to market The huge scale of development in the works is giving rise to more debt financings with diverse structures. “Loan-to-cost ratios are getting higher”, said Kelvin Lim, managing director for syndication and loan solutions at DBS Bank. “[They have] risen from 60% a few years ago to 70%–90%, and 80% is the norm now. There is competition on pricing and terms are constantly being tightened.” A developer’s ability to build quickly is a competitive advantage when it comes to attracting hyperscale offtakers that are keen to access capacity as fast as possible. Developers may acquire land and apply for electricity supply to start work on the facility before customer offtake contracts have been finalised. “From a risk-reward perspective, banks will look at entering into different financing arrangements based on the associated risk assessment,” said Cheah. “In Japan, we do see financiers being able to start financing the moment you have freehold interest of the land. In some other countries, we notice that they only start the bulk of their debt financing when the lease is signed or there is income productivity guaranteed.” While several data centre operators have relied on private equity in the early stages of development, others have turned to banks or private credit lenders for equity bridge loans. “As developers build up their portfolio of completed assets and there is a stream of cashflow coming in, they are starting to ask banks to lend against that or a corporate guarantee as an equity bridge while they build the core and shell of a project while they are ... negotiating a long-term offtake contract,” said Lim. “Subsequently, when the offt

With the incoming Trump administration expected to prompt a wave of merger and acquisition activity, the already contentious debate about costly forced M&A bond redemptions is likely to heat up. Special mandatory redemption language that requires an issuer to buy back M&A debt – typically at 101 cents on the dollar – if a merger falls through has become an especially significant risk over the past year due to the aggressive antitrust enforcement under Joe Biden's administration. It was evidenced in the high-profile collapse earlier this month of Tapestry’s proposed acquisition of Capri Holdings, the company behind fashion brands Versace and Jimmy Choo. “SMRs have become a little bit of a flashpoint for investors,” said Alexander Diaz-Matos, head of investment-grade research at Covenant Review. In Tapestry’s case, bondholders lost out significantly after opposition from the Federal Trade Commission led the fashion company on November 14 to cancel its planned purchase of Capri. The US$6.1bn of Tapestry's bonds – raised last year to pre-fund the acquisition – will be automatically redeemed at 101 due to SMR clauses. Tapestry’s US$1.25bn 7.85% 2033 senior unsecured notes were trading as high as 111 in mid-September, according to LSEG data, but dropped close to par after a federal judge ruled in favour of the FTC's lawsuit against Tapestry's acquisition. With that danger in mind, investors are increasingly likely to want to avoid SMRs – or at least alter their terms – in M&A bond financings, especially if dealmaking, as expected, heats up under Trump. Consulting firm EY-Parthenon on Thursday forecast an 8% increase in US corporate M&A deal volume next year. Valuable option For issuers, SMRs are valuable because they allow borrowers to redeem bonds at near par when a deal unravels, a valuable option if a drop in interest rates lifts bond prices to well above par after they are issued. Without the SMRs, an issuer would have to tender the debt at a costly premium. But investors complain that this option comes at bondholders' expense, as it did with Tapestry. “Investors need to be attuned to the SMR question and make sure that it doesn't turn into a ‘heads, I win; tails, you lose’ situation from the issuer's perspective,” said Diaz-Matos. Bondholder advocacy groups have already pushed for revisions to SMR provisions. The Credit Roundtable and Canadian Bond Investors' Association proposed last year that issuers raise the redemption price above the standard 101, which they viewed as insufficient compensation for the risk of a deal falling through. But due to investors’ overriding need for fresh paper, borrowers have so far been able to shrug off that pushback in a market environment where issuers are able to dictate terms. “[If] demand is really heavy, well, then issuers have a bit more power to structure their deals in a way that's more favourable to them, and that's certainly been the way our market has been set up for quite some time,” said Janet Rilling, senior portfolio manager at Allspring Global Investments. “It depends where the balance of power is in the market.” Even so, investors have had some success this year removing mandatory redemption language from a handful of M&A bond transactions including those for Diamondback Energy and Health Care Service Corp. And with the potential for the Trump administration to adopt a more relaxed approach to antitrust enforcement, investors are hopeful that a reduced risk of collapsed deals could make issuers more open to forgoing SMRs. “If the deals are more likely to go through, then [the borrower] does not necessarily need that SMR,” said Tony Trzcinka, a portfolio manager at Impax Asset Management. Rate cut bets One of this year's more high-profile victories for investors on SMRs came from US supermarket chain Kroger. In August, the compan