UK gas network operator Cadent stepped up from transition bonds and into the green bond market with a debut in the format on Tuesday, raising £300m through a no-grow 11-year senior unsecured note.
Cadent in March 2020 became the first UK corporate to issue a transition bond and sold a follow-up effort in March 2021. But after putting in place a framework to allow the issuance of EU Taxonomy-aligned green bonds, it opened itself up to a broader audience.
"Cadent has been leading the sustainable finance market with the transition bonds and framework and wanted to update the framework to match the best-in-class requirements," said a banker familiar with the matter.
"Only Snam and Cadent have issued in the transition format in Europe to date so the appetite for that type of label has not been as high as for green bonds. Getting that EU Taxonomy alignment and having things in place for green bond issuance allowed Cadent to showcase their transition story in a better way and appeal to a broader investor group."
Cadent has up to £2.9bn in eligible assets from its green finance framework.
The deal, expected to be rated Baa1/BBB+/A–, launched at Gilts plus 178bp, coming inside IPTs of 195bp–200bp, via Lloyds, Morgan Stanley and RBC as sustainability structuring adviser. A second banker familiar with the matter had seen fair value at 168bp–170bp, based on secondaries.
"It's a pretty flat curve and since the announcement last Friday the curve has also backed up a bit," said the second banker. "We were phenomenally happy to see the size of the book and the endorsement of the green framework."
The books finished in excess of £1bn.
Also out in sterling, air traffic management provider NATS added £145m to its £300m 1.75% September 2033s through Barclays, BNP Paribas, Lloyds and NatWest Markets. The tap, which drew more than £800m in orders, was increased by £10m from initial expectations.
The reopening was placed at Gilts plus 128bp from IPTs of 150bp area.
The 2033s were placed alongside a £450m note due March 2031 in 2021, part of a wider £1.6bn refinancing that included £850m of unsecured loans that included a £450m bridge. The company, rated A2/A+, said in its investor presentation that the tap secures medium-term funding, enabling it to cancel the bridge loan.
The two trades should encourage other issuers looking at sterling, the second banker said.
"Sterling dynamics seem very good," he said. "There are decent levels of cash around and investors are welcoming these new issue opportunities. Pricing dynamics also don't seem to have been dented by the volatility over the last week or so, boding well for an active March."