Shipping giant A.P. Moller-Maersk A/S borrowed $750 million in its first dollar-denominated green bond sale, the latest company to test investor appetite in a market challenged by political pressure.
The Copenhagen-based company sold bonds maturing in 10 years, according to a person with knowledge of the matter. The notes will yield 1.65 percentage points above Treasuries, after initial discussions of around 1.9 percentage points, said the person, who asked not to be identified as the details are private.
All proceeds from the offering will help finance or refinance green assets, which may include fixed assets, capital and operating expenses, as well as acquisitions of firms that derive at least 90% of their revenue from activities such as clean transportation and green buildings, said the person.
Maersk declined to comment.
The company’s spreads — or the added premium over U.S. Treasuries investors get paid to hold riskier debt — could come under pressure from subdued demand for container-shipping services amid lower disposable incomes and recession headwinds, Bloomberg Intelligence credit analyst Stephane Kovatchev wrote in a note on Monday.
“Maersk’s new green bond faces gray industry clouds,” wrote the analyst.“That said, the Danish company’s negative net debt position and management’s commitment to investment grade ratings remain key pillars for its credit story in the near term.”
‘All Hands on Deck’
The company issued its first green bond in November 2021, raising 500 million euros ($537 million) with a 10-year note. The company at the time said the proceeds will be used to finance the planned purchase of eight methanol-powered vessels.
A push to decarbonize the shipping sector, which has long depended on carbon-intensive heavy fuel oil, is gaining momentum but still has a long way to go, according to analysts at BloombergNEF. Container lines including Maersk are ordering more methanol-fueled ships, indicating green methanol is their low-carbon fuel of choice, the analysts wrote in a note last month.
“It’s now all hands on deck as the sector searches for a fuel that can help it clean up its act,” wrote the analysts.
Maersk’s debt deal serves as a test investor demand in the US, where sales of sustainable bonds have plunged amid a political backlash against investments tied to environmental, social and governance goals. Money managers are scrutinizing ESG-related financing instruments more heavily due to concerns that companies might be overstating the benefits of the bonds.
Companies as a result are issuing fewer green bonds denominated in dollars. Corporations have raised about $32 billion in dollar-denominated ESG bonds this year through Sept. 11, a 53% slump compared with the same period last year, according to data compiled by Bloomberg.
Maersk is working to reduce its greenhouse gas emissions to net zero by 2040, a decade earlier than its initial 2050 ambition, the company said in January 2022. Its 2030 targets include a reduction by half in emissions per container transported by the Maersk Ocean fleet and a 70% reduction in absolute emissions from fully controlled terminals, according to the statement.
Barclays Plc, Citigroup Inc., HSBC Holdings Plc, JPMorgan Chase & Co. and Morgan Stanley managed the bond sale, the person said.
--With assistance from Allan Lopez.
(Updates to show the bond sale has been priced.)