Digitalisation comes to the corporate bond market as Swiss energy firm Axpo makes the first ever fully electronic issuance.
Switzerland-based energy group, Axpo Holding AG has become the first ever issuer of an entirely digital issuance of a corporate bond. Using the independent debt capital market platform, Loanboox, the issuance, it says, marks the first step towards digitalisation and new standards in transparency, pricing and allocation in the primary capital markets.
Axpo’s seven-year green bond was over-subscribed, raising CHF133m (c.€123.4m). Some 35 orders were allocated to a range of institutional investors via the Loanboox platform in the 90-minute book-building window. The bond, which has a coupon of 1.002%, is listed on the SIX Swiss Exchange. Axpo will use the capital to finance projects in the photovoltaic and wind energy sectors.
As the first ever digital bond issuer Axpo, the largest energy company in Switzerland, understandably had initial reservations, says Martina Bühler, Head Marketing & Communications, Loanboox. Being an existing client of Loanboox, on the loans side of the platform, it already had experience of the company and its people, she explains. Axpo’s lengthy due diligence enabled it to proceed “with confidence”.
Initial anxieties allayed, Axpo’s main concern was that it wouldn’t get enough investors, says Bühler. “That’s also something we didn’t know until the day of the book-building.” This is the case for any issuance but with a traditional bond using an arranger bank, she notes a certain expectation that its market experience can be called upon to make it work, and in the worst case, the bank can even put in some money. “But we are a platform; we don’t provide money ourselves. We have to make sure that there are enough investors. It’s a topic we discussed a lot with Axpo. Everything though worked out as planned and Axpo was very happy with the transaction.”
It was essential that the bond was issued only on Loanboox, not given to a bank as well to test the pricing, says Bühler. Only this way could the price discovery capability of the platform be proven. This is seen by the firm as one of the main advantages of fully digital bond issuance, alongside the additional transparency that the issuer gets in regard to investors.
In practice, its proprietary live book-building tool enables issuers and investors to see the book building up and the price developing in real-time. Investors can submit an order, and change it, in response to price movements during the open period, enabling them to remain part of the issuance.
In the non-digital world, the lead bank calls potential investors for orders, but pricing is akin to a “black box” for them, and they may only get one chance to change their order, Bühler notes. “Live book-building allows both parties to see the price developing; it’s much more like an open marketplace.”
With Axpo opting for green bond issuance, the transparency afforded by the platform correlates well with the compliance needs of ESG-driven investors, says Bühler. With both sides able to see all details of the issue in advance of the book-building day, oversight of the whole transaction is now possible.
As Loanboox acts only as platform provider, it enlisted a full complement of supporting partners to bring this first digital bond to market. Société Générale Paris, Zurich Branch acted as paying agent and listing partner, and Deutsche Bank (London) as market maker. Loanboox also worked with First Advisory Bond Services as the holders’ representative, and PwC Switzerland as due diligence agent.
The next two confirmed digital issuances, by different organisations, are for non-green bond issuance. No further details were available, but TMI will keep an eye on these developments.