Daimler plans green bond for electric cars amid auto slump
Daimler AG plans to enter the green-bond market as it pushes ahead with work on electric vehicles even amid tumbling auto demand.
The Mercedes-Benz maker intends to make an offering in the “near term," it said in a statement on Thursday, as it published a green-finance framework. Funds will partly support the company’s push to only sell carbon-neutral cars by 2039.
Volkswagen AG also published a green-finance framework earlier this year, as automakers eye the $440 billion green-bond market as a way of raising funds for the hugely expensive shift to electric vehicles. Green-bond buyers may embrace greater diversity in a sector dominated by utilities, banks and governments, while weighing concerns about slumping vehicle sales and Daimler’s expectations for lower earnings.
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“We definitely welcome car manufacturers coming to the green-bond market," said Arnaud-Guilhem Lamy, who manages a 567 million-euro ($636 million) green-bond fund at BNP Paribas Asset Management. The profit warning won’t be an issue if the bond spread “is enough to mitigate the risk," he said.
Daimler will spend more than half the funds raised under the green-finance framework on clean transport projects, including developing and making electric vehicles, as well as battery recycling, according to an investor presentation. The rest will be used in areas such as energy efficiency.
A spokesperson for the carmaker declined to elaborate on the timing of the bond sale in an emailed reply to Bloomberg News questions. BNP Paribas SA and Skandinaviska Enskilda Banken AB are organizing investor calls about the framework next week, according to a person familiar with the matter who asked not to be identified because they’re not authorized to speak about it.
The carmaker joins a recent rebound in green-bond activity as easing coronavirus volatility lets companies refocus on long-term investments rather than on raising flexible financing needed to shore up liquidity. Daimler announced a 12 billion-euro loan in April to help it weather the virus upheavals. Green-debt funds can only be spent on projects with environmental benefits.
Volkswagen unveiled a green-finance framework in March, just before the coronavirus upended global bond markets. The company “remains fully committed" to the program and may use it to issue capital-market instruments depending on market conditions, a spokesperson said. VW’s Porsche sports-car unit sold a record 1 billion-euro green deal in the German Schuldschein debt market last year.
Daimler and VW will seek to tap environmental funds under the shadow of diesel-emissions cheating scandals. The Mercedes maker was fined by German prosecutors for “negligent violation of supervisory duties" last year. It warned of potential further crackdowns in its annual report, while boosting provisions for legal and regulatory costs.
Daimler has reiterated plans to introduce an all-electric version of its flagship Mercedes S-Class sedan next year, even as it cuts back in other areas due to the coronavirus slowdown. The company has said that full-year profit will decline, without elaboration. Its first-quarter vehicle sales fell 17% to 644,300.
S&P Global Ratings cut the automaker to BBB+ in March, while Moody’s Investors Service placed a negative outlook on its A3 rating this month. Cicero Shades of Green rated the new green framework Dark Green, the highest of three levels.