Award for innovation – bond structure: Tropical Landscapes Finance Facility project bonds

Channels: Green Bonds

Companies: Vigeo Eiris, BNP Paribas, Moody’s, Michelin, Barito Pacific Group, RLU, USAID, UNEP, TLFF, ICRAF, ADM Capital

Deal highlights:

Issuer: TLFF I Pte. Ltd

Size: $95 million

Maturity: 2023, 2025 and 2033

Coupon: Various fixed rates

Use of proceeds: Sustainable rubber plantation and rehabilitate degraded land in two provinces in Indonesia

External review: Vigeo Eiris

Lead managers: BNP Paribas

Credit rating: The Class A notes, which have a 15-year maturity, have a Aaa rating from Moody's

Other highlights/notable features: The first ever sustainability project bond issued in Asia Pacific to support a corporate

In February 2018, a $95 million, multi-tranche, sustainability-labelled series of project bonds was issued to help develop a sustainable rubber plantation and rehabilitate degraded land in two provinces in Indonesia.

Proceeds of the issuance were used to provide a 15-year amortising loan facility to Royal Lestari Utama (RLU) – a joint-venture between France's Michelin and Indonesia's Barito Pacific Group.

US Agency for International Development (USAID) provided a partial guarantee to the loan facility.

The project, which covers 88,000 hectares and involves collaboration with the World Wildlife Fund, will create natural habitat protection zones, including the creation of a critical buffer alongside the Bukit Tigapuluh National Park. At maturity, the plantation is expected to create some 16,000 jobs.

The transaction was conducted as part of the Tropical Landscapes Finance Facility (TLFF), a partnership between UN Environment Programme (UNEP), World Agroforestry Centre (ICRAF), ADM Capital and BNP Paribas, that aims to bring long-term finance to projects and companies that stimulate green growth and improve rural livelihoods in Indonesia. It is also a platform to securitise project loans in the capital markets.

The deal was structured following feedback from several major life insurance companies. There were three classes of notes: $30 million of Class A (15 years), $50 million of Class B1 (5 to 15 years), and $15 million of Class B2 (15 years).

A Japanese life insurance company purchased the Class A notes, which have a Aaa rating from Moody's.

The Class B1 notes appealed to impact funds, private banks and family offices.

BNP Paribas acted as sole arranger and lead manager of the note issuance.

The deal can claim to be the first sustainability project bond in Asia, the first sustainability bond in the ASEAN region, and the first sustainability project bond issued in Asia Pacific to support a corporate and the first for a rubber plantation.

It will pave the way for future projects, according to BNP Paribas. In June, the bank, UNEP and the state government of Andhra Pradesh in India announced plans to roll out natural farming to the state's six million farmers by 2024. It will have a capital cost of $2.3 billion.