Whitbread checks into GBP market in style with debut green bonds
A Force for Good – Whitbread pushes ahead with sustainability programme amidst COVID-19 pandemic
Whitbread PLC, the largest hotel operator in the UK with 11% market share, is the owner of the UK’s well-known hotel brand, Premier Inn, as well as restaurant brands Beefeater, Brewers Fayre, Table Table and Bar + Block.
With a successful 279-year history in the hospitality sector, the company, runs 820 hotels in the UK with over 78,000 rooms, and 712 restaurants in the UK and Ireland. Whitbread also has a growing presence in Germany with 29 hotels and a committed pipeline of 68 hotels.
Despite being heavily impacted by the COVID-19 pandemic, with much of the estate shut for long periods in 2020 during the UK wide lockdowns, Whitbread hasn’t weakened in its resolve to push ahead with its “Force for Good” sustainability programme. Updated in 2020 to reflect the impact of the Covid-19 pandemic on the hospitality sector, the programme is grouped into three key pillars - Opportunity, Community and Responsibility. Within each area, Whitbread has set long term strategic commitments to reach its goal of enabling people to live and work well.
As part of its “Force for Good” strategy, the hospitality company aims to halve its carbon emissions intensity by 2025, against a 2018/19 baseline, and to achieve net-zero emissions by 2050. Furthermore, Whitbread plans to remove single-use plastic across the business by 2025, halve food waste by 2030, and improve water stewardship. The firm already powers all of its UK hotels and restaurants with 100% renewable energy and announced in January 2021 the rollout of up to 1000 ‘GeniePoint’ Network rapid electric charging points, with 600 to be installed over the next three years in partnership with energy company ENGIE.
Investors back Whitbread’s clear sustainability targets and metrics
Looking to raise funding for its ambitious sustainability programme and to get access to ESG investors, Whitbread chose NatWest Markets as one of its active bookrunners to advise and support on its planned debut green issuance in the Sterling market.
After a series of investor calls, the hospitality company launched a dual-tranche green bond transaction, which also marked Whitbread’s return to the Sterling market after its debut issuance in 2015.
Investor demand soared quickly, leading to an orderbook that was ten times oversubscribed. Despite significant tightening of the spreads for each tranche, investors remained very keen to support, emphasising the strong investor appetite for corporate issuers with an ambitious sustainability strategy based on clear targets and metrics, and transparent ESG reporting. Whitbread were able to print the £300m May 2027 and £250m May 2031 bonds with coupons of 2.375% and 3.000% respectively.
Whitbread will use the proceeds from the issuance for projects within the categories outlined in the company’s recently published Green Bond Framework, which amongst others include green buildings, sustainable procurement practices and renewable energy.
Global green bonds market expected to see record volumes in 2021 after showing resilience during the COVID-19 pandemic
Looking back at 2020, green bond issuance grew for the ninth straight year to a record high of $269.5 billion, up from $266.5 billion in 20191. However, due to the COVID-19 pandemic, the $3 billion year-to-year increase in issuance was modest compared to the steep rise in issuances between 2018 and 2019, which totalled more than $95 billion. Nevertheless, in 2020, the green bonds market reached its most substantial milestone since its inception in 2007, passing the $1 trillion mark in early December.
To date, green bonds proceeds allocation has largely gone into the energy sector, with a volume of $354.7 billion, the building sector ($263.5 billion), transport ($190.7 billion) and water ($98.7 billion).
Looking ahead, the Climate Bonds Initiative predicts that 2021 could be another record year for green bonds, with issuance estimated to rise to as high as $450 billion, partly as a result of policymakers focusing on growing the market for climate finance overall.
Governments offering green sovereign bonds will be a key step towards further educating the market and potentially create pricing benchmarks for corporates. Spain is expected to issue its debut Euro green bonds in 2021, equally the UK its first green gilt. Green issuance could increasingly come from sectors which so far haven’t ranked high in any green bonds league table, such as the consumer goods sector, automobile or hard-to-abate-sectors, such as industrials. Daimler AG and Volkswagen indicated with their debut green bonds that change is in the air, and so did Whitbread.
New investors and NatWest help Whitbread reinforce its commitment to sustainability
Commenting on the transaction Luke Hasham-Smith, Corporate Financing & Risk Solutions, NatWest, said: “We’re delighted to have supported Whitbread with the issuance of its debut green bonds, providing a great financial platform to continue its ‘Force for Good’ programme. Climate is of paramount importance to our business, our customers and the economies we operate in, and we continue to support those preparing their own transition to sustainable operations.”
Nicholas Cadbury, Group Finance Director, Whitbread, said: “We thank our new bond investors and our relationship banks for their strong support for the Group.
We are particularly pleased that we have been able to reinforce Whitbread’s long-term commitment to sustainability by establishing this Green Bond Framework and issuing these Green Bonds. Whitbread is committed to being a force for good for all our stakeholders, including our people, customers, suppliers, in the communities in which we operate, and for the wider world around us.
The refinancing announced today demonstrates the strength of our underlying business, and is another key step in ensuring that we emerge from the crisis as a leaner, stronger and more resilient business.”