By Joy Wiltermuth
Verizon Communications Inc. saw high demand from investors for its new $1 billion green corporate bond that will help the telecom giant fund more environmentally friendly projects.
Pricing on the 10-year debt deal narrowed to 83 basis points over risk-free Treasurys /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y +0.65% , down from an initial peg of about 110 basis points above the benchmark rate, according to a person with direct knowledge of the dealings.
Spreads are the level of compensation investors are paid to own bonds above a risk-free borrowing rate, with lower spreads often pointing to high demand or a lower perceived sense of risk.
Verizon’s /zigman2/quotes/204980236/composite VZ -1.48% new green bonds will be used either for the development, construction or operation of renewable energy facilities, including wind or solar energy projects, or the purchase of renewable energy that helps bring renewable energy to the grids that power its networks, according to a public filing .
Moody’s gave the fixed-rate debt offering Baa1 ratings, while S&P Ratings applied its BBB+ score and Fitch Ratings gave it an A- grade.
The debt deal comes amid a flurry of recent U.S. corporate green bond issuance, including JPMorgan Chase & Co.’s /zigman2/quotes/205971034/composite JPM -2.11% debut last week.
Climate change and its potential for financial carnage have been in the spotlight as fires rage on the West Coast, draining the state’s resources .
But while Moody’s Investors Service tracked a record $99.9 billion worth of “sustainability bonds” issued globally in the second quarter, that’s only roughly on par with the roughly $95 billion of U.S. investment-grade bonds issued thus far in September, according to data from BofA Global data.
What’s more, the spate of eco-friendly debt also pales in comparison to the record $1.6 trillion already borrowed this year in the bond market by U.S. investment-grade companies looking to shore up their balance sheets for the derating of the pandemic.
Verizon did not immediately respond to a request for comment.