Hyundai Capital Services, the largest auto-finance company in Korea, returned to the USD bond market on February 1, 2021 with a successful USD 600 million green bond offering.
The offering closed with a 1.25% coupon at a spread of 92.5bp above five-year U.S. Treasuries. The coupon rate is lower than initial price guidance by 37.5bp, and the company secured the lowest spread and interest rate among all global bonds it has launched.
The new USD-denominated offering marked Hyundai Capital Services’ largest-ever green bonds and fifth green bond issuance in the international bond market.
The proceeds from the new issuance will be used for auto financial services for eco-friendly vehicles related to green projects in accordance with Hyundai Capital Services’ Sustainable Financing Framework.
Hyundai Capital Services held its first-ever virtual deal roadshow late January. During the roadshow, more than 80 investors across the United States, Europe and Asia reacted positively to the company’s recent development and recognized it’s strength, such as leading market position in Korea; solid capital adequacy ratio; and strong level of affiliate support by Hyundai Motor Group.
"Despite the ongoing aftereffects of Covid-19, global investors increasingly prefer to invest in social responsibility, and the market for Environmental, Social and Governance (ESG) is booming,” said Daniel Lee, head of Finance Division at Hyundai Capital Services.Hyundai Capital Services ESG Framework
Interest in ESG issues has grown significantly in the global capital markets recently. ESG refers to three factors that measure sustainability and the social impact of corporate investment: Environment, Social, and Governance. With the recent kickoff of Joe Biden administration in the United States, which is poised to make climate change a central issue, investors are expected to pay more attention to ESG.
However, given global concerns over “greenwashing”- which refers to the issuers raising funds at low interest rates and enjoying tax benefits in the name of eco-friendliness but failing to keep their investment promises – bond issuers require a validated ESG framework based on international standards.
In anticipation, Hyundai Capital Services established Sustainable Financing Framework to ensure transparent and continuous tracking and management of project selection procedures, evaluation, use of proceeds, and follow-up reports. An annual report will is available at Hyundai Capital Services website.
Hyundai Capital Services developed its Sustainable Financing Framework last year in accordance with global trends, and DNV-GL, a globally recognized ESG-related institution, certified the framework’s global standard. The company applied the new framework to global bond issuance for the first time in the offering on February 1.Accelerating Green Financing in the Auto Sector
Hyundai Card, Hyundai Capital Services, and Hyundai Commercial, financial subsidiaries of Hyundai Motor Group, have established themselves as Korea's ESG bond powerhouses in the past few years. ESG bonds issued by the three affiliates are worth a combined 1.87 trillion won in the Korean currency market, versus USD 1.75 billion equivalent in the global market.
Hyundai Capital Services issued green bonds in USD 500 million in 2016 to become the first private company issuing green bonds. The deal also marked the world’s first issuance of senior green bonds in the automobile sector.
The company is renowned for issuing bonds in diverse currencies. In addition to the Korean won and the U.S. dollars, the currencies include Swiss francs and Chinese yuan. In January 2019, Hyundai Capital Services issued green bonds in 250 million Swiss francs, followed by 300 billion won green bonds in April 2019 to become the first Korean credit finance company to issue green bonds in the Korean currency.
Meanwhile, Hyundai Card issued 240 billion green bonds in August 2019 for the first time as a Korean credit card issuer. Hyundai Commercial joined the ranks of green bond-issuing financial firms through the 250 billion green bonds issuance in August 2020.
“We are an active player in ESG bond market, issuing the most diverse currencies in Korea,” said Daniel Lee, head of Finance Division at Hyundai Capital Services. “With various ESG-related projects, we will continue supporting Hyundai Motor Group’s commitment to global sustainability.”Hyundai Card, Hyundai Capital, and Hyundai Commercial Green Bond Issuance History
|1||January 2021||Hyundai Capital Services||US dollars||USD 600 million|
|2||October 2020||Hyundai Capital Services||Korean won||KRW 200 billion|
|3||September 2020||Hyundai Card||Korean won||KRW 450 billion|
|4||September 2020||Hyundai Capital Services||Chinese yuan||CNH 600 million||The first Korean company to|
issue dim sum green bonds.
|5||August 2020||Hyundai Commercial||Korean won||KRW 450 billion|
|6||July 2020||Hyundai Capital Services||Swiss francs||CHF 300 million|
|7||June 2020||Hyundai Capital Services||Korean won||KRW 230 billion|
|8||December 2019||Hyundai Capital Services||Korean won||KRW 200 billion|
|9||August 2019||Hyundai Card||Korean won||KRW 240 billion||The first credit card company to|
issue green bonds.
|10||April 2019||Hyundai Capital Services||Korean won||KRW 300 billion||The first Korean credit finance company to|
issue green bonds in the Korean won.
|11||January 2019||Hyundai Capital Serviceser||Swiss francs||CHF 250 million||The first private company in Asia to|
issue green bonds in Swiss francs.
|12||March 2016||Hyundai Capital Services||US dollars||USD 500 million||The first Korean private company to|
issue green bonds.