Binder Groesswang has advised Austrian electricity provider Verbund AG in connection with the world's first Environmental Social Governance-linked syndicated loan, the interest rate of which is not determined by reference to the financial rating but by reference to a sustainability rating established by the ESG rating agency Sustainalytics. Signing and closing of the EUR 500 million loan took place on December 10, 2018.
"We are pleased to have supported Verbund AG in the realization of financial innovations on several occasions," commented Binder Groesswang Partner Emanuel Welten. "Following the issue of the world's first digital green bond in the spring of 2018, we were now able to advise the innovative company on the placement of the world's first syndicated loan evaluated according to sustainability criteria."
Sustainalytics, which Binder Groesswang describes as "a global leader in ESG valuations and ratings," assigned Verbund an ESG risk rating. According to Binder Groesswang, "the results of this rating are used to determine the interest rate for the syndicated loan entered into by Verbund AG with 12 banks. If Verbund AG's sustainability rating decreases during the term of the loan, the cost of the loan will rise. However, if there is an improvement in Verbund AG’s sustainability rating, the costs will decrease. The term of the loan is five years, [and] the interest rate is determined once a year based on the results of the external sustainability rating."
The Binder Groesswang team consisted of Partner Emanuel Welten and Associate Adrian Zuschmann.
As reported by CEE Legal Matters in March, 2018, earlier this year Binder Groesswang assisted Verbund AG with the issuance of a green bonded loan arranged by German bank Helaba Landesbank Hessen-Thuringen.