UPL to refinance Arysta’s M&A debt with $ 500 million green loans
UPL, formerly United Phosphorus, is the fifth largest agrochemical company in the world.
In July 2018, it agreed to acquire agricultural pesticide maker Arysta LifeScience Inc. for $ 4.2 billion in cash. The acquisition was funded primarily by a $ 3 billion loan from Japanese bank MUFG and RaboBank of the Netherlands.
“ESG investments are becoming massive all over the world. The new facility will help us tap into a new investor base while simultaneously reducing our cost of borrowing by 35 basis points, ”said Jaidev Shroff, global CEO of UPL. “We have systematically prepaid our loan obligations and will continue to do so. ”
These five-year loans, also syndicated by the two global banks, are linked to specific environmental objectives for UPL from March 2020: reducing water consumption by 20% and reducing carbon emissions and waste disposal. 25% over five years.
The papers will then be sold to financial institutions, asset managers, private clients and family offices around the world, particularly in Europe, Japan and the United States. If the targets are met, the company will be able to reduce its tariffs by an additional 5 basis points.
“UPL was ranked # 1 in the world for agrochemical companies by Sustainalytics ESG Risk Rating Report and is also the only crop protection company to be mentioned in S & P’s 2021 Global Sustainability Yearbook,” said Shashank Joshi, Head of Banking Services to companies at MUFG. “An ESG element in the financing adds to the appetite for such corporate papers. The company does not increase new debt, but reduces its financing costs. ”
The crop protection company previously raised $ 400 million through a perpetual bond and followed it up with another $ 500 million 10-year bond in May 2020 to repay $ 500 bonds that arrived. maturing in October 2021, which are fully repaid. It has also repaid $ 200 million in Arysta acquisition debt and an additional $ 300 million is currently being repaid, company officials said.
“The focus is on debt reduction, with the recent $ 410 million bond buyback, positive reduction and further reductions planned for the fourth quarter,” said Alok Dalal, analyst at CLSA. “UPL has set itself the target of doubling net debt against EBITDA (ex-perpetual bonds) by the end of fiscal 21.”
Arysta’s debt was raised with the foreign arm UPL Corporation, which is home to the sprawling global operations of India-listed parent company, UPL Ltd. Abu Dhabi Investment Authority and TPG are the other key investors who invested $ 1.2 billion in the Arysta takeover. .
UPL shares were hit hard in December, falling nearly 15% in one day, after an alleged whistleblower complaint highlighted financial malfeasance within the company. The company has denied any wrongdoing, with CEO Shroff calling them “completely malicious.”
The number of sustainability-focused index funds and their assets has doubled in the past three years, according to Morningstar. The financial research firm said there were 534 sustainability-focused index funds, overseeing a total of $ 250 billion at the end of the second quarter of 2020.
In the United States, which has lagged behind Europe in ESG investing, sustainable index fund assets have quadrupled over the past three years and now represent 20% of the total. Combined inflows into ESG-focused active and passive funds reached $ 71.1 billion in the second quarter, pushing global assets under management above the $ 1,000 billion mark for the first time.
It is also playing out in India. Recently, Aditya Birla group company Ultratech raised a $ 400 million foreign exchange bond linked to ESG.
ET reported in its Jan. 28 issue that an internal Deutsche Bank committee blocked the German bank from becoming the arranger of a $ 500 million bond issue by Adani Ports and Special Economic Zone over environmental concerns emanating from the Indian conglomerate’s controversial coal mining project in Australia.