Costa Rica issues benchmark sized green bond

Costa Rica’s central bank, Banco Nacional de Costa Rica (BNCR), has issued a benchmark sized green bond in a first for the small Central American sovereign.

Apr 29, 2016 // 4:47PM

The central bank of Costa Rica has issued its first green bond, which is also the first high yield green bond to originate in Latin America.

“This is the first time the BNCR and the sovereign has tapped the green bond markets,” said Andrew Whiley, Communications Manager at Climate Bonds Initiative.

He added that it was pleasing to see that banks are becoming the first to issue in the markets. Whiley stated that it was a signal to governments and corporates that green bonds make up an important part of present financing strategies.  

The central bank issued US$500mn of senior unsecured green bonds with a tenor of 5 years. The bond launched at 5.95%, pricing with a coupon of 5.875%. Initial price thoughts on the issuance were in the 6.50% area, and original guidance was for a US$500mn 5 year bond with a yield of 6.125%.

The bond was met with high demand and was oversubscribed by 5.5 times, with the orderbook for the bond reaching US$2.75bn.

20% to 25% of the bond was allocated to specialist green bond accounts, which included names that had never took part in Latin American deals before.

The proceeds of the bond will be used to finance wind, solar, hydropower and wastewater projects.

The sovereign timed its bond issuance carefully, as it could have been overlooked coming at the same time as Argentina’s huge return to the international capital markets.  

Costa Rica’s green bond is the fourth such issuance to emerge from Latin America. “There is a lot of potential for the green bond market in Latin America, particularly in Brazil,” Whiley noted. However he added that the markets are still not quite as developed as they are elsewhere.

BNCR is rated Ba1 by Moody’s and BB+ by Fitch. The lead banks on the transaction were JP Morgan and Bank of America Merrill Lynch.

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