GFL mulls green bond deal

Company hopes to reduce debt costs

GFL Environmental Inc., a waste management company whose largest shareholder is investment firm BC Partners, is considering a debut in the green bond market as the company looks to digest an acquisition spree and reduce debt costs.

The Vaughan, Ont.-based company may go ahead with the transaction to finance projects such as the construction of large organics processing facilities similar to those the firm has built in British Columbia and Ottawa, chief executive Patrick Dovigi said in an interview.

“Our view is that there is going to be a couple of projects that actually qualify for that program,” said Dovigi, adding that an eventual green bond may be priced at a lower yield than its regular securities.

GFL, which carried out around US$4 billion of mergers and acquisitions in 2020, is looking to reduce interest rates on its debt. The company is considering the green bond sale at a time when issuance of such debt is at record levels, partly driven by a so-called greenium, which allows borrowers to notch lower yields than comparable, conventional securities.

While GFL would be a new company for green bond investors, it's a regular borrower in the high-yield debt markets. In December, the firm — which operates in Canada and 27 states in the U.S. — issued US$750 million of 3.5 per cent bonds at par, data compiled by Bloomberg show.

The company expects to build three large organics processing facilities at a cost of around $50 million to $60 million each, said Dovigi. The facilities — two of them to be in the U.S. and one in Canada — are expected to be rolled out over the next two years.

After publishing its first sustainability report last year, GFL is in the process of setting specific environmental, social and governance-related targets.

GFL was challenged last year after hedge fund Spruce Point Capital Management LLC alleged that the company required injections of new capital and questioned its accounting. GFL called the allegations “misleading and false statements.” Spruce Point largely reiterated its allegations in a Sept. 23 letter to Paolo Notarnicola, who chairs GFL board's nomination, governance and compensation committee, and is an executive at BC Partners.

GFL's stock price has risen more than 65 per cent since the closing on the day that Spruce Point — which at the time said it had a short position on the company's stock — issued its allegation in August.

Spruce Point officials didn't reply to requests for comment about their views on GFL and whether they continue to hold a short position on GFL.