To
respond to the disruptive economic and social impacts due to the Covid-19 virus
in Italy, Cassa depositi e prestiti SpA (CDP), a public-sector development
agency backed by the Italian government, has issued a €1 billion dual tranche
3-year and 7-year benchmark senior unsecured bond to respond to the crisis. This is
the first such response bond seen in Italy and confirms CDP’s key role in
supporting the Italian society and economy during this current challenging
environment. The issuance will finance in part CDP’s commitment to support
Italy in the fight against Covid-19, providing a concrete response to limit the
economic and social damage.
The
issuance follows a number of recent sustainable bond transactions from development
banks in response to Covid-19, such as the Nordic Investment Bank (NIB),
European Investment Bank (EIB) and African Development Bank (ADB), and marks a
significant deal for Italy.
Proceeds
from the €1 billion benchmark senior unsecured transaction will be used to help
sustain the recovery of the Italian economy and communities, as outlined in
the investor presentation. Specifically, the use
of proceeds will:
- Help corporates, mainly small and medium-sized enterprises (SMEs), access banking and financial services, also through direct lending
- Provide local authorities with financial support in their efforts related to healthcare, social and economic measures
- Finance the construction, development, maintenance or renovation of healthcare facilities, medical equipment and technologies for the improvement and protection of public health
BNP Paribas acted as Joint Lead-Manager on this deal. Agnès Gourc, Co-Head of Sustainable Finance Markets comments, “This social bond allows investors to gain even greater transparency into the Covid-19 relief measures put in place by CDP. It signifies an important milestone for Italy in funding its fight against Covid-19.”
CDP successfully priced €500 million 3-year with 1.50% gross annual coupon and €500 million 7yr with 2.00% gross annual coupon. Investor response was very strong and the order book closed above the €1.9 billion mark. The Covid-19 Social Response Bond offering attracted high quality investors with a meaningful participation of socially-responsible investors (SRI).
Recent weeks have seen a strong supply of social bonds as sovereigns, supranationals and agencies (SSA’s) and other issuers turn to this market to raise finance in response to Covid-19. Financial institutions and corporates could also start issuing Covid-19 response bonds in the coming weeks and months, which highlights their collective role in responding to the pandemic.
CDP, a frequent issuer of sustainable bonds, will use the proceeds of this social bond in line with their Green, Social and Sustainability Bond Framework, which also aligns with a range of the UN’s Sustainable Development Goals (SDGs), in particular SDG3 (Good Health & Wellbeing) and SDG8 (Decent Work & Economic Growth) for this transaction.
With the country in its sixth week of lockdown, the Covid-19 crisis has had a huge social and economic impact on Italy with 2.2 million businesses halting their operations and 7.4 million of Italy’s work force not working. As such, the new social bond, focused on SDG3 and SDG8, will play a pivotal role in supporting the social and economic recovery from this crisis.
Fabrizio Palermo, CDP chief executive, underlined the role the new Covid-19 social response bond would play in supporting the country’s relief efforts. “CDP will further support enterprises and public administrations to foster their ability to cope with the current crisis and recover,” he said. “The demand registered is proof of the growing attention investors are paying to initiatives of high social and environmental impact and is a positive signal for Italy.”