Bank of Cyprus Embarks on Sustainable Finance Journey with Green Notes Issuance
In a significant move towards sustainable finance, the Bank of Cyprus has made a grand entrance into the green bond market. The bank’s announcement on Thursday marked the successful launch and pricing of €300 million in green senior preferred notes, a first for the institution under its EMTN Programme. These notes, priced at par, come with a fixed coupon of 5 per cent per annum, payable annually until May 2, 2028, which is the Optional Redemption Date.
Investors have shown a robust appetite for the bank’s green initiative, with the order book closing at an impressive €1.3 billion—over four times the offered amount. This strong demand allowed for final pricing to tighten by 50 basis points from the initial indication. The notes are set to mature on May 2, 2029, but should they remain unredeemed post the Optional Redemption Date, the coupon will shift to a floating rate pegged to the 3-month Euribor plus 197.1 basis points, payable quarterly.
The Bank of Cyprus is aligning this issuance with its ‘Beyond Banking’ philosophy, which emphasizes a commitment to fostering a sustainable future for Cyprus. In line with this ethos, the net proceeds from these notes will be funneled into eligible green projects that resonate with the bank’s sustainable finance framework. This framework prioritizes areas such as green buildings, energy efficiency, clean transport, and renewable energy.
From a regulatory standpoint, these green senior preferred notes are expected to conform to the Minimum Requirement for Own Funds and Eligible Liabilities (MREL) criteria. This compliance will bolster the bank’s MREL ratio significantly, positioning it well above the final requirements set for December 31, 2024.
The transaction has been facilitated by a consortium of financial heavyweights including BofA Securities Europe SA, Deutsche Bank AG, Goldman Sachs Bank Europe SE, and J.P. Morgan SE as Joint Lead Managers. CISCO played a role as Co-Manager, while legal advisories were provided by Sidley Austin LLP and Chryssafinis & Polyviou LLC.
With settlement expected on May 2, 2024, and listing on the Luxembourg Stock Exchange’s Euro MTF market, the Bank of Cyprus is poised to make a significant impact in the realm of sustainable finance. The success of this inaugural green bond issuance not only underscores investor confidence but also heralds a new chapter in the bank’s commitment to environmental stewardship and economic resilience.
