Bank of China contributes to a $1.4 billion AUD syndicated sustainability-linked loan for Downer EDI for refinancing purposes

Project narrative

In December 2020, financial close was reached on a deal in which a syndicate of 29 banks — including the Bank of China (BOC) — entered into a $1.4 billion AUD ($1.02 billion USD) syndicated sustainability-linked loan (SLL) agreement with Downer EDI Limited — an Australia-headquartered integrated services and construction firm working in Australia and New Zealand — for refinancing purposes. This loan was divided into four tranches: a three-year revolving credit tranche with an interest rate of BBSY plus an opening margin of 160 basis points (bps), a four-year revolving credit tranche with an interest rate of BBSY plus an opening margin of 170 bps, a five-year revolving credit tranche with an interest rate of BBSY plus an opening margin of 180 bps, and a six-year term loan tranche with an interest rate of BBSY plus an opening margin of 200 bps, as based on Downer's current BBB credit rating from Fitch. The loan featured four Key Performance Indicators (KPIs) that measured Downer's ability to meet greenhouse gas emissions targets from Science Based Targets Initiative, social sustainability goals on cultural awareness and mental health and wellbeing training of Downer's employees. If Downer met all these targets, its interest margin could shrink by 6 bps in aggregate; if it failed to meet any, its interest margin could grow by 4 bps. The proceeds of this loan were to be used by the borrower to refinance various debt, including the debt of Spotless Group Holdings, which Downer had acquired 100% of in October 2020. In addition to BOC, BNP Paribas S.A. contributed to this loan syndicate as Joint Bookrunner and Joint Sustainability Co-Ordinator. More than 24 lenders joined the loan syndicate in general syndicate; this led to the up-sizing of the loan from its initial $1.2 billion AUD target and led the loan to become the most-widely syndicated SLL in the Asia-Pacific. Australian, Chinese, Japanese, and Taiwanese banks accounted for nearly two-thirds of the $1.4 billion AUD loan and first-time lenders to Downer were the majority of the 29 lenders of the syndicate. This was the largest SLL in Australia in 2020.