French luxury brand Chanel recently announced the completion of a 600 million euro bond raising, which will be used to achieve the brand's sustainability and environmental goals.
According to the brand's chief financial officer Philippe Blndiaux, although the privately-run Chanel has released its annual performance briefing since 2017, this is the first time that Chanel has entered the bond market, offering two options of 5-year and 10-year terms.
Part of the funds raised will be used for external investment. The investment targets include the development of start-up companies that can replace new materials such as plastic and leather.
According to the agreement structure, if the bond expires, Chanel and its supply chain's emission reduction results do not meet the preset target, Chanel will have to pay a certain fee.
Philippe Blndiaux pointed out that Chanel’s future financing strategy will be in the form of sustainable bonds. “It can be said that it is natural to do so, because the financing strategy we have formulated is consistent with the company’s strategy and is aimed at creating a more sustainable Development model."
The lead underwriter of this round of transactions stated that Chanel plans to raise 300 million euros, but the market demand for its short-term bonds (with a nominal yield of 0.5548%) has reached 600 million euros, and the demand for long-term bonds (with a nominal yield of 1.059%) has reached 750 million euros.
In mid-September this year, Chanel created a new human rights and corporate sustainability executive position, which was held by Agathe Derain.
In March of this year, Chanel released an official document called "Chanel Mission 1.5°", which elaborated on the brand's strategy to address climate change. The brand is consistent with the goals of the 2015 Paris Climate Agreement, hoping to limit the increase in global average temperature to 1.5°C compared to the pre-industrial period. The contents of the document show that Chanel plans to invest US$25 million in the next five years to protect local communities affected by rising global temperatures.
Further reading: In recent years, in order to carry out sustainable development projects and achieve green goals, many luxury goods companies have raised special-purpose funds through banks or bond markets.
In September of this year, Burberry announced the issuance of bonds to raise funds for sustainable development projects.
Burberry said that this will be the company's first "sustainable bond", which will enrich Burberry's funding sources and introduce long-term debt financing into the company's capital structure. It is reported that the bonds issued by Burberry will be approved to be included in the official list of the UK Listing Authority and traded on the main market of the London Stock Exchange.
Currently, Burberry has applied for rating agency Moody’s to rate the bond, which is expected to be Baa2 (stable outlook).
The Burberry Sustainability Bond Framework has received third-party comments from the research service agency Sustainalytics. According to the description of the framework, holders can hold bonds at the same interest rate as Burberry's overall debt, and Burberry Group itself does not provide guarantees for the above-mentioned bonds.
Burberry said that when the new crown epidemic broke out at the beginning of this year, the company used a revolving credit line of 300 million pounds, which was repaid in full in the first quarter. In addition, Burberry issued 300 million pounds of short-term commercial paper based on the Bank of England’s commercial financing line, which will expire in March 2021.
In recent years, Burberry has made some progress in the field of sustainable development. The company expressed its hope to achieve carbon neutrality by 2022 and is switching to renewable energy sources to reduce greenhouse gas emissions. Burberry changed the packaging of its products, partly made of recycled coffee cups, and was certified by the Forest Stewardship Council (FSC).
