March 26, 2021

Pilgrim's Pride offers first sustainability-linked bond from meat sector

Pilgrim's Pride has offered the first sustainability-linked bond (SLB) from the meat sector on March 25, Nasdaq reported.

At US$1 billion the deal is also set to become the biggest of just a number of SLBs to emerge in the US high-yield market to date. The unsecured 10-year non-call five note is linked to the company's targets to reduce greenhouse gases.

If by 2025 the company has not met its sustainability targets, the coupon will grow by 25 basis points per year, until the target is met and confirmed by an third-party verifier.

The B1/BB+/BB+ rated bond is tied to the company's targets of reaching a 17.5% reduction in Scope 1 and 2 greenhouse gas emissions by 2025 and 30% reduction by 2030, from a 2019 baseline.

Earlier this week Pilgrim's Pride committed to achieving net zero greenhouse gas emissions by 2040.

"These actions reinforce our company's long-standing commitment to responsible environmental stewardship and sustainable food production," says Fabio Sandri, Pilgrim's global chief executive officer.

While being more accessible to issuers, unlike traditional green bonds, the issuer is not tied to using the proceeds for specific green projects. Some investors feel that penalties for missing sustainability targets are too low and too late in the life of a bond to have an impact.

Pilgrim's Pride has a range of other sustainability targets, including reducing electricity, water, and natural gas usage, achieving a specific score on animal health scorecards, and compliance with supplier codes of conduct, but the bond offering is tied only to performance on its greenhouse gas target.