Bpifrance issued its first social bond this week, and intends environmental, social, and governance issuance to make up about half of its funding next year.
Bookrunners Bank of America, Barclays, BNP Paribas, Natixis and Société Générale priced the €1.25bn 3.5% September 2027 bond at 39bp over OATs after 2bp of tightening from initial guidance. The spread over mid-swaps is understood to be around 10.8bp.
“It’s our inaugural social bond,” said Eric Louis, head of capital market funding at Bpifrance in Paris. "It’s in our DNA to support businesses, in particular SMEs, and we have a lot of social assets on our balance sheet so we decided to set up a social financing framework and start with this new [themed] bond."
The Aa2/—/AA- rated French agency has already sold one ESG deal this year, a €1bn 3.125% May 2033 green bond, in June. It was Bpifrance’s third green issue, following the €1.25bn debut in 2021 and a deal of the same size a year later.
With €2.25bn raised this year in green and social formats, Bpifrance intends to beef up ESG as part of its funding mix. “Issuing ESG bonds can help us highlight the details of our activities when talking to investors, and increase our visibility and transparency," Louis said.
“We would like to have €4bn-€5bn of ESG issuance — likely split between two green bonds and two social bonds — as part of our 2024 programme, which should be around €9bn.”
For 2023, the issuer has about €1bn left to fund after raising €5bn, but it has yet to decide whether to launch another benchmark or round off the year’s funding with taps of its 2026 and 2027 bonds.
ESG helps
Bpifrance joined French peers Cades and Unédic as well as European agencies BNG Bank, Investitionsbank Berlin, Instituto de Crédito Oficial and NRW.Bank in raising social debt this year, amid an overall decline of social issuance.
In all currencies, public social bonds issued by supranationals and agencies have plunged 25% year-on-year to $44bn-equivalent, according to Dealogic. The fall in euro social bonds has been even more stark — by almost 50% to €22.25bn.
Bpifrance’s new social bond received final demand of over €2.9bn, making it 2.3 times subscribed — higher than the 2.1 times average book coverage for agency and sub-sovereign issuers in euros over the past month, according to data from GlobalCapital’s Primary Market Monitor. Bpifrance's green deal in June attracted a whopping 17.8 times covered book.
Louis thought the ESG label is helpful to issuers, but said it was difficult to quantify any pricing advantage. “In the current market, issuing ESG bonds can help with the bookbuilding momentum and the order book subscription,” he said. “It’s also a way to improve the book quality. But until we have more bonds on our ESG curve, it’ll be too early to talk about greenium or social premium.”
A lead manager on the deal, who agreed that pinpointing greenium or social premium was difficult as it became “more and more subjective”, put the 2027 bond's new issue concession at 2bp versus the issuer’s conventional curve, having seen fair value at 37bp over OATs on Monday morning. By Wednesday, the bond had traded 2bp tighter.
Bpifrance’s social framework has a second party opinion from Ethifinance, and is aligned with the ICMA Social Bond Principles of June 2022 and the Social Objectives specified by the Platform on Sustainable Finance in its Final Report on the Social Taxonomy in February 2022.
Issuance off the framework will be used to fund loans to French micro, small and medium-sized enterprises in disadvantaged territories or those that are affected by natural or health disasters, loans to finance innovation and digitalisation, loans to support social inclusion, health and education, and export loans to developing countries.
