Environmental Finance's Sustainable Debt Awards 2024

Green bond of the year - US muni bond: Arkansas Development Finance Authority

Issued through the Arkansas Development Finance Authority in May 2023, United States Steel (U.S. Steel) Corporation secured funding for eligible green expenditures relating to electric arc furnaces (EAFs) in Arkansas via a $240 million green bond.

The bond attracted the judges' attention for its innovative structure that allowed a private corporation access to the US muni bond market to achieve a lower cost of funding, longer tenor and greater optional redemption flexibility when compared with a traditional corporate offering – the offering has a maturity of 30 years with a three‐year optional redemption.

Bond proceeds will be used for handling, sorting, processing, treatment and recycling of ferrous scrap metals, which are the primary raw materials for the company's EAFs.

U.S. Steel expects to use at least 65% recycled scrap material as an input into the steelmaking process and reports the facility will recycle two million tonnes of scrap annually.

Construction of the facility is expected to be completed in 2024 and will feature two EAFs.

"This year, U.S. Steel expects to complete the most advanced steelmaking facility in North America, financed in part by this successful green bond offering," said Arne Jahn, vice president – treasurer & chief risk officer, U.S. Steel.

"In Osceola, Arkansas, our Big River 2 facility will recycle millions of tons of scrap annually, with 70-80% fewer greenhouse gas emissions compared to traditional steelmaking, to create the sustainable steels our customers demand, such as verdeX™ steel. Many thanks to the teams at the Arkansas Development Finance Authority as well as BofA Securities on this successful offering."

Due to strong investor demand, driven by the green bond designation, BofA Securities reports it was able to decrease the rate by five basis points to the final rate of 5.70%.

Construction at U. S. Steel’s Big River 2 facility in Osceola, Arkansas.

Lawrence Tonomura, managing director, BofA Securities, commented: "Responsible production is a focus area of the UN Sustainable Development Goals and a critical part of strong environmental stewardship."

U.S. Steel is an integrated steel producer of flat‐rolled and tubular products with production operations in the US and Europe. The company utilises iron ore, coal, coke, natural gas, steel scrap and other metallic additions to produce flat rolled and tubular steel products for the industrial, transportation, construction, container, appliance, oil, gas, and petrochemical markets.

Deal highlights

Issuer: Arkansas Development Finance Authority
Size: $240 million
Maturity: 1 May 2053 with a three‐year optional redemption
Coupon: 5.70%
Use of proceeds: Eco-efficient products, production technologies and processes
External reviewer: Self-certified
Lead manager: BofA Securities
Credit rating: BB/BB‐ from Fitch and S&P, respectively