Enbridge to raise $1B in bond deal connected to sustainability

Enbridge Inc. is set to raise $1 billion by issuing what would be the first sustainability-linked bond sold by a North American pipeline company.

The Calgary-based plans to price the 12-year securities to yield to 105 basis points over U.S. Treasuries, according to people familiar with the matter. That's tighter than the spread between 120 and 125 basis points earlier offered, said the people. The Enbridge SLBS would be attractive should they be priced at a spread of at least 95 basis points, according to Creditsights.

This is Canada's second company to offer sustainability-linked bonds after Telus Corp. sold $750 million of the debt this week. Earlier this month, Italy's Eni SPA became the first oil company to sell euro-denominated bonds tied to cutting carbon emissions. investors Thursday.

It “has one of the most conservative asset bases within midstream energy,” said Charles Johnston and Pengyu Xiong of Creditsights said in a note to investors Thursday.

The debt includes a potential step-up should Enbridge fail to comply with targets regarding reduction of carbon emissions as well as representation of racial and ethnic minorities in its workforce. Enbrige plans to use the proceeds for general corporate purposes, including repaying existing debt and help funding capital projects.

Enbridge's 2033 sustainability-linked bond coupon will have a step-up of 50 basis points if the firm doesn't comply with a target to reduce its carbon emissions by the end of 2030, said the people, who asked not to be identified because the details are private. Also the interest payment may rise should less than 28 per cent of the company's employees be from ethnic or racial minorities by the end of 2025.

Sustainability-linked bonds are a nascent asset class that generally penalizes issuers with higher borrowing costs if they don't meet certain environmental, social and governance metrics. If the issuer meets or exceeds the targets, the coupon remains unchanged.

The company is also issuing $500 million of 30-year regular securities to yield 130 over Treasuries after earlier offering them a spread of around 155 basis points. A press officer for Enbridge confirmed the final terms of the deal.