transport of london

  • The first Green Bond Framework developed purely for sustainable transport.
  • The longest ever Sterling Green Bond.
  • 2.125% coupon – second lowest fixed rate coupon that TfL has printed.
  • Achieved TfL’s objective of diversifying its investor base and tight pricing.

Transaction highlights

On 16th April 2015, Transport for London (TfL) announced a benchmark 10 year Green bond with Initial Price Thoughts set at Gilts+60 bps area.

The deal followed a two day roadshow in London, that in addition to seeing UK based investors included a Global Investor Call, a number of 1-on-1 calls with international Green investors and a Netroadshow. In total ~60 investors were reached in the marketing effort. The bookrunners employed a two-day execution strategy to allow participation from international accounts, gathering ~£400m of Indications of Interest before opening the books formally on 17th April. The orderbook peaked at ~£600m but subsequently dropped to ~£550m as pricing tightened.

TfL ultimately priced a £400m transaction at G+57 bps – at the high-end of the targeted deal size and the tight-end of guidance.

The 10 year maturity was targeted to capture a balance of international Green investors, Official Institutions and Bank Treasuries who typically play in shorter maturities as well as the traditional UK real money accounts. The strategy paid off with the orderbook consisting of ~30% Central Banks or Official Institutions, ~10% Bank Treasuries and 39% non-UK accounts whilst Green Investors made up ~69% of the total orderbook.

The TFL Green Bond Framework

Bank of America Merrill Lynch worked closely with TfL in order to develop a Green Bond framework in line with the Green Bond Principles, market best practice, TfL’s needs and investor demands.  They also worked with TfL to obtain a second party opinion on the TfL Green Bond from DNV.

The net proceeds of the Bond will be invested in the ‘Eligible Project Categories’, as defined in TfL’s Green Bond Framework. These categories include:

  • London Rail Capacity and Enhancement Projects;
  • World Class Capacity on the London Underground Network;
  • Station Upgrades and Station Capacity Projects;
  • New Routemaster Buses and Bus Fleet Upgrades; and
  • Cycling Improvements.