Ticket to ride
Thailand’s BTS Group broadened the scope of the ESG market by selling a sustainability-linked bond to retail investors and structuring it in a way that made a real difference to its operations.
The mass rapid transit operator’s deal was the first in Asia ex-Japan to be offered to retail, and Thai investors rushed to snap up the notes, allowing BTS to take home its maximum targeted size of Bt20bn (US$580.8m) at the end of November. Some Bt13bn was raised for the retail portion and Bt7bn for the institutional part.
The retail portion was made up of a Bt4.1bn 2.95% two-year bond, a Bt5bn 3.85% 4.5-year, a Bt1.7bn 4.35% 7.5-year and a Bt2.2bn 4.7% 10-year. The institutional portion, which had the same tenors and prices, raised Bt1.6bn, Bt1.9bn, Bt1.9bn and Bt1.6bn, from each tranche respectively.
The final prices reflected estimated savings of 20bp–25bp for the issuer compared with a conventional bond.
The strong results of the trade were a surprise to some in the market who doubted that retail investors could understand an SLB structure.
But BTS kept the structure as simple as possible, avoiding the coupon adjustments that an SLB would normally have. Instead, if BTS does not meet its sustainability targets, it will buy renewable energy certificates. This will verify that the company is using electricity provided from renewable sources and would penalise BTS, which would have to pay millions of baht for the certificates.
BTS sweetened the appeal of the notes by giving buyers points under its Rabbit Rewards loyalty scheme, which can be redeemed for free trips and retail products.
Taking the SLB structure to the masses spread the transport provider’s green message to the public, as well as tapping into additional demand. It also followed the theme of the COP27 meeting, which focused on the need for companies in developing markets to make steps to improve their greening process when it is not possible to make a wholesale move to net zero emissions.
Transportation accounted for about 28% of Thailand’s carbon emissions in 2021, and BTS estimates that since it began operating the Skytrain metro network in Bangkok in 1999, it has contributed to the avoidance of more than 1.9 million tonnes of CO2. It already uses renewable energy to power its green line and issued its first green bond in 2019.
Bangkok Bank, Kasikornbank, Krungthai Bank and Siam Commercial Bank were joint lead managers for the institutional placements as well as joint lead managers with CIMB Thai Bank for the retail tranches.
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