By Beate Sonerud and Sean Kidney
China’s Trina Solar (TSL)is issuing US$100m of convertible bonds with 5-year tenor and 4% annual coupon, with semi-annual payments. An extra US$15m could be raised, as Trina has given the underwriters a 1-month window to buy additional bonds. Guess they are waiting to gauge demand. Underwriters are Deutsche Bank, Barclays, and Credit Suisse, with Roth Capital Partners as co-manager.
The bonds can be converted to shares (American Depositary Shares, meaning they are listed in the US) at an initial price of US$14.69 per share. Currently, Trina’s shares are trading at US$11.40, after falling sharply due to concerns that Japan, the world’s second largest solar market, will reduce subsidies to solar – which would mean reduced business demand for Chinese solar companies, including Trina. So shares will have to rise substantially before it’s attractive for bondholders to convert the bond.
Trina Solar is a leading manufacturer and service provider in PV solar – therefore we consider it a pure-play company aligned with a climate economy. However, this bond, as their previous offerings, are not labelled green bonds and consequently there is no second party review on the green credentials of the use of proceeds (Trina reports that the proceeds will be used for general corporate purposes, which may include development of solar power projects, expansion of manufacturing capacity and working capital). We do think there is room for labelling also for solar companies like Trina, as it would make it easier for investors to identify the investments. It is also a much simpler process to label solar than non-pure play companies – check out our solar standards for details of what we’d expect from a labelled solar bond.
This is Trina’s second convertible bond offering so far in 2014, following a previous issuance of US$150mn in June. Convertible bond issuances have been a popular financing choice for solar companies this year. We are including them in our climate bond universe because, although they are more complicated than vanilla bonds, they are still bonds until converted.
Beate Sonerud is Policy Researcher and Sean Kidney is Chair of the Climate Bonds Initiative, an “investor-focused” not-for-profit promoting long-term debt models to fund a rapid, global transition to a low-carbon economy.