CRN plans only sustainable issuance after senior first

Caja Rural de Navarra intends to raise all new wholesale funding under a sustainability framework it inaugurated with a cédulas last November, according to its head of treasury, after the issuer sold its first senior unsecured deal under the framework and signed up to the Label.

Caja Rural de Navarra (CRN) became one of only four issuers to have sold a sustainable covered bond, with a Eu500m seven year deal in November 2016. Unlike the three preceding sustainable trades, CRN did not have a commitment linking the covered bond to sustainable collateral, but was rather a “use of proceeds” deal typical of wider green and social bonds.

Two weeks ago the Spanish cooperative sold its first senior unsecured bond under the framework, a Eu100m five year deal via HSBC.

“Our intention is to make all new issues within the sustainability framework,” said Miguel García de Eulate, head of treasury and capital markets at CRN, noting that it has a Eu500m cédulas maturing in June 2018. “We think that we will be able to keep the sustainability portfolio large enough to match our financing needs in the coming years, so we expect to renew maturing cédulas and senior unsecured within the sustainability framework.

“We believe that if this works as we expect, it wouldn’t make much sense to go outside the sustainability framework for new issuance.”

According to the issuer’s 2016 sustainability report published earlier this month, lending under the nine financing lines within its framework totalled over Eu2.5bn to more than 35,000 borrowers at the end of last year.

Financing lines in sustainability framework (EUR m)

Source: CRN

CRN’s sustainability framework references the Green Bond Principles and Social Bond Guidelines, which are managed by ICMA. The latter were upgraded to Social Bond Principles last week a move that García de Eulate welcomes.

“Even though green bonds are more well known, green could even be considered as a part of social, from my point of view,” he said. “At least now they are at the same level.

“Being a retail cooperative regional bank, the social aspect is very important to us,” García de Eulate added. “And, especially for financials, upgrading the social aspect of sustainability can increase the supply that can potentially go to the market.”

The Covered Bond Label Foundation today (Friday) announced that CRN has signed up to the Label, which in March began allowing issuers to tag sustainable issuance with a green leaf icon.

“A sustainable business model must also be a proactive and transparent one,” said García de Eulate. “We believe that by including our covered bond programme within the Covered Bond Label and particularly by highlighting our sustainable covered bonds, our institution will improve investors’ awareness about our long-lasting and stable retail banking strategy as a regional and cooperative bank.”

Luca Bertalot, Covered Bond Label Foundation administrator and EMF-ECBC secretary general, said that CRN is one of the pioneers of sustainable covered bonds.

“The Label, thanks to its bottom-up approach to transparency and its continually evolving reporting data, is in a unique position to move in-step with market needs,” he added. “It is this flexibility which has allowed the Label, since early in 2017, to accommodate innovative issuers such as Caja Rural de Navarra with their sustainable covered bonds, which are clearly identifiable by the green icon next to their ISIN.”

CRN is only the second issuer to have a sustainable bond flagged on the Covered Bond Label website after compatriot Kutxabank.