Klabin ties new notes to water management



	 Klabin ties new notes to water management | Klabin, water, Brazil,

BRAZIL (From news reports) -- Brazilian paper manufacturer Klabin is expected to become the second LatAm corporate to issue a sustainability-linked note later this week, taking advantage of increased interest in this kind of debt.

Investor calls on the new 144A/RegS senior unsecured issue began Monday and are being led by BofA Securities, Bradesco, Citi, Itau, JP Morgan, and Morgan Stanley.

Reports from Fitch Ratings and Lucror said they expected a 2031 maturity, with the deal expected to price later in the week. The deal is rated BB+/BB+ by S&P and Fitch.

"I understand the shadow book for the deal went very well," said a source close to the deal.

The note will carry three key performance indicators (KPIs), which will trigger a step-up on the bond's coupon if the goals are not met.

Sustainability goals are tied to water consumption intensity, water reuse and recycling, and the reintroduction and reinforcement of water species into the ecosystem.

There is a 12.5bp coupon step-up if the water consumption KPI is not met, an 8.25bp step-up on the water reuse and recycling KPI, and a 6.25bp penalty if the reintroduction of water species goal is not met.

Lucror analyst Sebastian Hofmeister said in a report he expected the notes to price around 3.5%.

That would offer a pick-up of around 50bp to a 3.75% 2031 SLB issuance from fellow Brazilian pulp and paper firm Suzano, which priced in September 2020 and was trading at a yield of around 2.95% as Tuesday morning, according to MarketAxess data.

The Suzano deal was the first sustainability-linked note from the LatAm region and drew US$7bn in demand. It included a 25bp step-up penalty if the company fails to cut carbon emission by 15% by 2030.

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