BHP: think big with an SLB

5 minute read

Mining giant BHP is looking to tap the US dollar bond market for the first time in ten years with three tranches (3, 5 and 10 years). Barclays, BofA Securities, BNP, MUFG and Santander will act as joint bookrunners. The bonds have an expected rating of A2/A- (Moody’s/S&P). BHP is one of the largest coal miners in the world and in 2021 they made some successful coal divestments.

More recently its strategy has shifted, reportedly both due to surging coal prices and reduced investor concerns. Retaining Mt Arthur coal mine seems to be alongside an extension of its operating life from 2026 to 2030, which is still shorter than attempts to offer it for sale with an operating life to 2045.

While divestment can clean up a company for its investors, the bigger picture can be that the problem is pushed elsewhere, often with less oversight and transparency. In this piece, we propose an alternative Sustainability-Linked Bond (SLB) structure that would involve targets on Scope 1, 2 and 3 emissions as well as a 100% reduction in thermal coal reduction, in line with the company’s earlier commitments. In our view, this would open up the potential for more investors to invest in the name as part of a credible transition story.

We also discuss how stronger documentation can be added, with language allowing investors to ‘put-back’ their debt, if specific decommissioning objectives are not achieved.

Download pdf (0.2mb)