A unit of conglomerate Ayala Corp. is raising $100 million from the issuance of 10-year “social bonds,” the first ever to be carved out of the Philippine health-care sector, to the International Finance Corp. (IFC).
Proceeds from such special bonds are used to achieve positive social outcomes such as in health, education, gender, affordable housing and food security, offering an avenue for investors to generate returns while helping address social issues.
In the case of Ayala, proceeds will be used to build the operations of the group’s health-care arm, Ayala Healthcare Holdings Inc. (AC Health), which has the following key areas of focus: retail pharmacy, pharmaceutical importation and distribution, primary care and multispecialty clinics, tertiary hospitals and health technology platforms.
The bonds will be issued by AYC Finance Ltd., a foreign subsidiary of Ayala, which in turn guarantees the bonds.
‘Underinvestment’
“The pandemic exposed the massive underinvestment in the country’s health-care system, reinforcing our thesis for entering the sector six years ago. The social bond supports our strategic priority to scale up AC Health as a new growth platform, underpinned by its commitment to uplift the quality and access to preventive care in the country,” Fernando Zobel de Ayala, Ayala president and CEO, said in a press statement on Thursday.
“The issuance will strengthen Ayala’s ESG (environment, social and governance) financing capabilities and support growth for businesses that can make concrete social contributions, particularly in the health-care industry. We look forward to a long-term partnership with IFC in providing quality, and accessible health care for all Filipinos,” said Alberto de Larrazabal, Ayala chief finance officer and chief sustainability officer.
The transaction will be settled in January 2022 based on the prevailing base rate plus a certain spread, subject to the completion of the condition precedents set by IFC.
Critical challenge
“Addressing health gaps in the Philippines is a critical challenge that has been amplified by the COVID-19 pandemic,” said Rana Karadsheh Haddad, regional industry director, manufacturing, agribusiness and services for Asia and the Pacific at IFC.
“Our investment in this social bond from our long-standing client, the Ayala Group, will help strengthen the Philippines’ health-care system at a crucial time while also helping to develop the market for social bonds, which is becoming an important tool for helping the private sector manage the socioeconomic impacts of the pandemic and build resilience against future shocks,” Haddad added.
IFC’s social bond program aligns with the Social Bond Principles and Social Loans Principles published by the International Capital Market Association.
Sustainalytics was engaged to provide a second party opinion on the Social Bond Framework.
Ayala, meanwhile, has identified 11 sustainable development goals that are at the heart of its businesses. It also announced in October its commitment to achieve “net zero” greenhouse gas emissions by 2050, aligning its business strategy with the Paris Agreement’s goal of limiting global warming to 1.5 degrees Celsius compared to preindustrial levels.