Case study

VW reignites market with €1.75bn green bond to support their EV rollout

18 Apr 2023 . 3 mins

Mobility for generations to come

Volkswagen Group is one of the world’s leading automobile manufacturers and the largest carmaker in Europe across its various brands. It also offers a wide range of financial services.

Across all its brands and activities, sustainability is an integral part. This is reflected in “New Auto” 2030 Group strategy and the Group purpose of “Mobility for Generations to Come”, with decarbonisation one of six focus areas. Volkswagen has committed to become a net carbon-neutral company by 2050 and has set Science Based Targets initiative-aligned targets covering its operations and the lifecycle emissions of its vehicles. Alongside the Group’s build out of electric mobility – with planned investment of around €52 billion by 2026 – VW focuses on integrating renewably-generated electricity in the use phase and switching production plants’ external power supply to renewable energy.

Volkswagen’s Green Finance Framework supports the realisation of this strategy. It is a focused framework, including the single project category of clean transportation, which only includes the company’s electric vehicle development – hybrid vehicles are excluded. As part of the October 2022 update of the framework, Sustainalytics provided a Second Party Opinion confirming alignment to applicable market standards. The company has now issued €7.75bn of green bonds, confirming their increasing relevance to its capital structure.

Green bond receives outstanding reception with 475 orders from 278 investors

Preparing for their first transaction in 2023 on the public market, a green dual tranche to be issued under its Green Finance Framework, VW International Finance N.V. mandated NatWest as Active Bookrunner on the transaction, including managing the documentation and Billing and Delivery (B&D) workstream.

Thanks to VW’s strong brand recognition among investors, its solid investment-grade rating and the Green UoP format of the issuance, VW was the perfect candidate to re-open the market. After a successful bookbuilding exercise, the company was able to lock in €1 billion for the 3-year bond at a 3.875% coupon and €750 million for the 6-year tranche at a 4.250% coupon.

A sizeable number of investors, 278 in total, submitted 475 orders, with accounts from Germany/Austria/ Switzerland leading demand for the 3-year tranche with 26%, followed by investors from France (22%), and from the UK and Ireland (20%). 24% of the allocation of the 6-year tranche went to French investors, 21% of investors in the UK & Ireland, and 19% to investors in Germany/Austria/Switzerland. 66% of the orderbook of the 6-year tranche and 63% of the 3-year tranche went to investors with strong or modest ESG commitments.

VW green bond will help restore issuer confidence after recent market developments

Philippe Bradshaw, Head of Syndicate Portfolio & Risk Management Capital Markets at NatWest, commented: “Only a few issuers would be able to re-open the markets in such fashion, and we are delighted to have been able to support VW with this very successful green transaction. The size of the order books highlights VW’s strong reputation, but this issuance also reflects the depth of demand, with investors keen on deploying large amounts of cash for the right names. This dual tranche has paved the way for further supply.”

Dr Arthur Krebbers, Head of Corporate Climate & ESG Capital Markets at NatWest, added: “VW has become one of the most prominent green finance issuers of its sector, with a focused framework that supports the electrification and decarbonisation of transportation. We are delighted to support the company in achieving its ESG objectives through this financing exercise.”

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