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POSCO Becomes the First-Ever Steelmaker to Issue ESG Bonds

2019/07/19

l POSCO CEO Jeong-Woo Choi says the bonds will help expand the company’s investment in energy, environment, and new business development
l POSCO’s business results and strong credit ratings boost investors’ confidence in global finance communities
l POSCO’s issuance of ESG to meet the rigorous expectations of the global financial market on Socially Responsible Investing

POSCO issued ESG bonds, the first-ever sustainability bond issued by a global steel-making company. The company successfully issued the five-year environment, social and governance (ESG) bonds worth 500 million USD to investors worldwide on July 8.

The ESG bond is a type of sustainability debt offering aimed to finance corporate activities in environmental, social responsibility and governance improvement. What POSCO issued is sustainability bond that combines green bond and social bond – the former pertaining to eco-friendly projects while the latter applies to issues of public concerns such as job creation.

POSCO CEO Jeong-Woo Choi said the bond issuance will help expand the company’s investment in energy and environment – and POSCO plans to allocate the net proceeds towards the financing projects related to electric vehicle batteries, renewable energy, new group growth and eco-friendly projects such as mutual growth activities to develop the steel industry’s ecosystem.

Ahead of the successful issuance of the ESG bonds, POSCO established a sustainable financing framework in April to match the standards of green bonds and social bonds set by the International Capital Market Association. Sustainable financing frame work specifies the purpose and usage of ESG bonds as well as monitoring plans. After an external review from Sustainalytics, POSCO’s sustainable financing framework successfully received certification.

In executing the deal, POSCO overcame the uncertainty surrounding the US-China trade disputes and the fluctuating US dollar rates due to the staggering global economy. Despite higher market volatility POSCO’s excellent business results and strong credit ratings boosted investors’ confidence.

* POSCO’s credit rating: Moody’s (Baa1 Stable); S&P (BBB+ Positive)

HSBC, Bank of America Merrill Lynch, BNP Paribas, and Standard Chartered Bank acted as the joint book-runners and lead managers for the transaction. Asian investors accounted for 65% of the subscribers, followed by American institutions (28%) and European investors (7%). The issuance rate was set at 2.874 percent, 105 bps (bookvalue per share) added to the five-year U.S. government bond rate, and the bonds will be listed on the Singapore Stock Exchange.

Meanwhile, POSCO’s issuance of ESG bonds is receiving positive evaluations for its effort to meet the rigorous expectations of the global financial market on Socially Responsible Investing (SRI).

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