Uruguay in $700 Million Sustainability-Linked Bonds Offering

November 6, 2023

Cleary Gottlieb represented the Republic of Uruguay (Uruguay) in an offering of $700 million 5.75% sustainability-linked bonds due 2034.

The issuance of the bonds constituted a further issue of Uruguay’s $1.5 billion outstanding 5.75% sustainability-linked bonds due 2034 initially issued on October 28, 2022. The offering priced on November 6, 2023, and is expected to close on November 9, 2023.

Sustainability-linked bonds are designed to motivate issuers to meet ambitious sustainability targets, which are measured by key performance indicators (KPIs). Unlike green bonds and other ESG-labeled bonds, the proceeds of these offerings are not directed to specific projects. Instead, sustainability-linked bonds provide that if the specified KPI is not achieved, the issuer will be subject to a step-up in the coupon rate on the bond.

With the issuance of the 5.75% sustainability-linked bonds due 2034, Uruguay became the first issuer to include a coupon step-down if it overperforms on the pre-defined targets by a certain threshold. The targets contemplated by Uruguay’s bonds include achieving a reduction in aggregate greenhouse gas emissions, expressed in CO2 equivalent per real GDP unit, by 2025 compared to 1990 and maintaining or increasing the native forest area covering Uruguay’s territory by 2025 compared to 2012.

BNP Paribas Securities Corp., Goldman Sachs & Co. LLC., and Scotia Capital (USA) Inc. acted as underwriters for the bonds offering.