Linklaters Wins “Sovereign Bond Deal of the Year” for The Republic of Chile’s ground-breaking sovereign sustainability-linked bond
The award was presented to Linklaters on November 30, 2022 at the Bonds & Loans Latin America & Caribbean Awards 2022, held at The Ritz-Carlton Coconut Grove in Miami, Florida. The awards ceremony recognized the most innovative and ground-breaking deals from Latin America and the Caribbean.
Linklaters advised the Republic of Chile on becoming the first sovereign worldwide to issue a sustainability-linked bond, through the offering of US$2 billion 4.340% notes due 2042.
The notes were issued pursuant to the Republic of Chile’s Sustainability-Linked Bond Framework, which the Republic of Chile adopted in February 2022 and sets out goals with respect to two key performance indicators: (i) absolute greenhouse gas (GHG) emissions, and (ii) the share of non-conventional renewable energy generation in the Republic of Chile’s national electric system. The sustainability performance target for the first key performance indicator comprises two events: (i) achieving annual GHG emissions of 95 metric tons of carbon dioxide equivalent (MtCO2e) by December 31, 2030, and (ii) achieving a maximum GHG budget of 1,100 MtCO2e between January 1, 2020 and December 31, 2030. The sustainability performance target for the second key performance indicator comprises the following event: generating 60% of the total electricity generated in the Republic of Chile in the year ended December 31, 2032 from nonconventional renewable sources.
Under the terms of the notes, from and including March 7, 2034, the interest rate payable on the notes will be increased by either 12.50 or 25 basis points unless the Republic of Chile has delivered an officer’s certificate to the trustee at least 30 days prior to March 7, 2034 certifying that each of the sustainability performance target events has been satisfied and the satisfaction thereof has been confirmed in the verification reports.
The Republic of Chile intends to use the net proceeds for general purposes of the government.
It was reported that the offering of the notes attracted more than 230 investors from Europe, Asia and the Americas with the order book reaching over US$8 billion. The demand allowed Chile to significantly tighten the initial price target and obtain a new issuance premium that the Republic of Chile’s Ministry of Finance described as “unprecedented” in the current market conditions.
The Linklaters team was led by partner Conrado Tenaglia (Capital Markets) and counsel Alejandro Gordano (Capital Markets), alongside counsel Gabriel Grossman (Tax), associate Matthew Russo (Tax), associate María Vaz Ferreira (Regulatory) and foreign attorneys Manuel Eyzaguirre and Loreto Joannon.
Linklaters has been involved in a number of “first” SLBs by issuers in Latin America, including the first emerging-market SLB issued in 2020 by Suzano, a leading Brazilian pulp and paper producer, and the first SLB issued in Peru by SMI, a leader in rigid plastic packaging solutions in Latin America.
Linklaters has also advised the Republic of Chile on eight SEC-registered offerings and two 144A/Regulation S offerings of thematic bonds in an aggregate amount of approximately US$25 billion since January 1, 2021.
