Chile Sells Biggest Latin American Sovereign Sustainability Bond

(Bloomberg) -- Chile raised a total of about $4.25 billion in euro and U.S. dollar markets Tuesday amid strong investor demand, including the biggest sustainability bond issued by a Latin American sovereign in foreign debt markets.

The nation borrowed $2.25 billion in a two-part dollar-denominated sale that included $1.5 billion of sustainability bonds, the biggest from the region, according to data compiled by Bloomberg. Chile also raised $1.65 billion euros ($2 billion) in European markets to fund green and social projects.

The longest-term portion of the European deal -- a 1.25 billion euro security maturing in 30 years -- represents Latin America’s biggest foreign currency social bond from a sovereign. That debt was sold at 98.814 cents on the euro to yield 1.298%.

Both the dollar and euro offerings were oversubscribed by investors with dedicated environmental, social and governance mandates, Chile’s finance ministry said in a statement Tuesday. ESG-conscious buyers gobbled 48.5% of the total euro sale and the interest rates obtained on the green tranches maturing in 10 years and above were the lowest obtained by the country, according to the ministry.

“The country’s favorable access to financing in international markets reflects the confidence they have in Chile’s medium-term prospects,” Finance Minister Ignacio Briones said in the statement.

Emerging-market governments are rushing to global bond markets as low rates and high spending needs fuel the typical January flood. Panama is expected to sell bonds on Wednesday, a day after securing a $2.7 billion credit line from the International Monetary Fund, as the nation looks to lock in low borrowing costs. Junk-rated Bahrain, Laos and Turkey separately started selling new deals on Tuesday, with Turkey’s having priced late in the day.

Chile said the latest offering is part of its $19 billion financing plan for 2021 calendar year, with as much as $6 billion expected to come from foreign currency debt. The nation has issued a total of approximately $12.6 billion in ESG-linked bonds in dollars, euros and Chilean pesos to date, the ministry said. That includes $2.11 billion of “social bonds” in a two-part deal in local currency in November.

The government can use social bond proceeds to fund projects aimed at supporting the elderly or people with special needs, low-income families, food security and programs designed to alleviate unemployment, among others, according to its sustainable bond framework. Meanwhile, green bonds can fund initiatives like clean transportation, renewable energy and green buildings.

Sovereigns, supra-nationals and agencies typically blaze a trail for companies by doing ESG-linked debt deals and Chile’s sale may encourage corporations to issue more social bonds, which helped the global sustainable debt market to grow by 29% to a record $732 billion last year.

BNP Paribas, Citigroup Inc., HSBC Holdings plc, JPMorgan Chase & Co. and Banco Santander SA managed Chile’s latest offerings.