Largest-ever ESG-linked Schuldschein issued by non-German company

The French auto­motive technology company Faurecia SE has issued an ESG-linked Schuld­schein with multiple tranches and a total volume equivalent to EUR 700 million. With an initial volume of EUR 300 million, the order book was over­subscribed several times. The proceeds will be used to part-finance the acquisition of the German auto­motive supplier Hella GmbH & Co KGaA. Helaba played a leading role as ESG advisor in the largest-ever ESG-linked Schuld­schein issued by a company outside Germany.

"This trans­action clearly demonstrates that Schuld­schein issuances with ESG components are also very success­ful at the international level," says a delighted Frederick de Graaf, Corporate DCM at Helaba's Paris branch. "We are especially pleased that we had the oppor­tunity with Faurecia to support an issuer that is actively involved in the transformation of the auto­motive sector and pursuing a well-defined sustainability strategy," adds Susanne Hübers, Head of International Corporate Clients France. The metrics and performance targets used for the ESG-structure were aligned with Faurecia's ambitious CO2 reduction strategy, which includes a commitment to slash the company's carbon emissions by 80 % by 2025 compared to 2019. This target, which has been validated by the Science Based Target Initiative, is designed to contribute to limiting global temperature increases to 1.5°C. "There is no doubt that Helaba's support was a decisive factor in making this trans­action a success, not only because it is one of the leading arrangers in the Schuld­schein market but also because it has the necessary sustainable finance expertise," said Selim Hadj-Smail, Vice President Group Financing & Treasury at Faurecia.

No perfor­mance premium if ESG targets achieved

This issue, arranged by Helaba and Commerzbank, represents a departure from the hither-to standard step-up/down system of linking the interest rate to the achieve­ment of ESG targets. As such, Faurecia has deliberately opted against a step-down if it achieves its strategic CO₂ reduction targets. However, if the targets are not met, a coupon step-up would apply to the longer maturities. In other respects, the trans­action aligns also more closely to the practices observed in the bond market than to what has been customary on the Schuld­schein market in the past. For example, the key metrics and performance targets are set out in a publicly available Sustainability-Linked Finance Framework, which Faurecia designed to address both the recent and very success­ful EUR 1.2 billion bond placement as well as the Schuld­schein issue. In addition, a second party opinion by the sustainability agency ISS ESG confirms the ambition of the reduction targets and compliance of the framework with the Sustainability-Linked Bond Principles. "The challenge was to structure the ESG component of the Schuld­schein to be aligned with the Sustainability-Linked bond that was issued almost simultaneously and to design the framework such that it could also be used for the Schuld­schein," explains Rainer Neidnig, Head of Sustainable Finance Advisory at Helaba. "The transaction is without doubt a milestone in the Schuld­schein market and could serve as a blueprint for future trans­actions, especially for large issuers that regularly enter the bond market as well," Neidnig said.