Volkswagen AG is making its green bond debut, some two weeks after Daimler AG, as automakers turn to socially responsible investors to help pay for the hugely expensive switch to electric vehicles.
The automaker VW and Audi is offering two Eurobonds maturing in eight and 12 years, according to a person familiar with the offer, who was not asked to identify as he is not authorized to speak about it. The company, one of Europe’s largest corporate borrowers, introduced a green financing framework in March, similar to the way the coronovirus upheaval closed the bond markets.
VW’s first green bond sale, coupled with the European Union’s massive issuance plans, helps further boost the environmental debt market by adding greater size and variety to a sector traditionally dominated by banks, utilities and governments. The automaker may also benefit from growing investor appetite for green bonds, particularly from new issuers, which helped Daimler and Germany price recent debut sales at a discount compared to traditional offerings.
“There is great demand for green assets,” said Michael Kobel, Union Investment’s portfolio manager in Germany.
VW has used the green fund to help pay for electric vehicle and charging station projects as it seeks to challenge Tesla Inc. and Renault SA in the battery-powered car market. Efforts have been hampered by software issues in the ID.3 model.
In 2015, the automaker admitted that around 11 million of its diesel vehicles worldwide were equipped with devices that gave false readings during emissions tests. He is still dealing with lawsuits over the scandal, while promoting new environmental initiatives.
“If investors are really receptive to this, it would imply that they have left Dieselgate and are more progressive,” said Daniel Ender, credit strategist at Amsterdam-based ABN Amro Bank NV.
The company has been monitoring market conditions since it published its framework in March, it said in an email response to questions from Bloomberg News.
Mercedes-Benz maker Daimler likely saved more than € 1.3 million a year in borrowing costs by selling a green bond instead of a conventional note, according to Bloomberg calculations. The 10-year, 1 billion euro green bond was priced more than 13 basis points tighter than its conventional liquid spread curve, according to Bloomberg BVAL on Sept. 3.
According to data compiled by Bloomberg, borrowers have syndicated the equivalent of approximately 64 billion euros of green bonds in Europe this year. This count is approaching the 2019 total of € 70 billion, even after the first coronovirus market was closed for the year.
According to an acquaintance, Banco Bilbao Vizcaya Argentina SA, Commerzbank AG, HSBC Holdings PLC, ING Group NV and Societe Genera SA are working on the deal.
