SEGRO seizes ‘window of opportunity’ to price €750m green bond

This week’s €750 million (£626 million) bond issuance from SEGRO European Logistics Partnership (SELP), which is a joint venture partnership between UK REIT SEGRO plc and Canada’s Public Sector Pension Investment Board, was arranged in a matter of days in order seize a “window of opportunity” in the European capital markets, the firm told Real Estate Capital.

BNP Paribas, Bank of China, NatWest Markets and Santander advising SELP on its debt issuance strategy alerted the company on Monday that there was sufficient appetite from investors for the senior unsecured five-year green bonds for SELP, the investor in big box warehouses across European markets.

SELP launched the issue this Tuesday in order to refinance €500 million of non-green bonds on SELP’s balance sheet that are due to expire in October next year.

The senior unsecured five-year green bonds for SELP – which invests in big box warehouses in European markets and has a €7.6 billion portfolio – came from an order book that totalled approximately €2.5 billion.

Harry Stokes, who is commercial finance director at SEGRO, which acts as venture adviser to SELP, said: “The banks were obviously aware that we were looking to refinance the 2023 bonds, so kept an eye on the market for us. We knew this week would be a potential opportunity given that SELP were due to publish a half-year update on 28 July, so it was just whether there was a supportive market, which there was, so we decided to launch, after a day of talking to potential investors, updating them on SELP’s performance during the first half and on the outlook for the business.”

Stokes said the demand for the notes was “good”, adding that while looking at ways to refinance the bonds ahead of time regardless of market conditions is integral to “good capital management”, it has seized a “window of opportunity” to issue the bonds this week.

The bonds were priced at 245 basis points above euro mid-swaps, equating to an annual coupon of 3.75 percent.

Last May, SELP priced an eight-year, €500 million senior unsecured green bond issue at 90 basis points above euro mid-swaps, with an annual coupon of 0.875 percent.

“The markets have not been easy,” said Stokes. “There have been very few European bond deals in the market as the situation has been volatile because of the Ukraine crisis and rising inflation. We didn’t need the money urgently, but now investors are more comfortable that there is a plan for the bonds which are due to mature in 2023.”

Year-to-date green bond issuance in Europe is €12.04 billion compared with €29.40 billion in 2021, according to data compiled by Bloomberg and Scope Ratings.

Stokes added: “It is a very tough market out there. But the banks are experts on this and talk to investors the whole time. Our story is strong. Logistics is a popular sector and it wasn’t our first bond, which means investors know the company. We were hoping for good demand and we were pleased with level of support.”

The issuance was the first from SELP’s recently established European Medium-Term Note programme, a standing prospectus which allows the company to be agile in issuing new debt.

Green expectations

The capital will also be used to finance and refinancing what SELP’s Green Finance Framework calls “eligible green projects”, as well as providing funding for general corporate purposes. Stokes said that it was difficult to tell if the demand related to the green element of the bond, but added: “Investors are increasingly expecting companies to issue bonds that are green and that is what they should be expecting. There is an expectation now that a bond will be green and if it isn’t questions will be asked.”