San Miguel SLB: missed target efficiently digested

The SLB, issued in August 2021, was classified in earlier AFII analysis as ’50:50’, identifying risks to the target being achieved, primarily due to a lack of data. On 7 June 2024 the company disclosed that the target for its first KPI, the percentage of recycled plastic content used, was missed, though the second target on waste management was met by an undisclosed margin.

The bond responded to news of the miss by outperforming a basket of comparable securities, moving +2.1% vs +0.6% in the following two weeks. This is despite no apparent media coverage at the time, and a delay in the coupon being adjusted in Bloomberg until October. This move suggests market efficiency in digesting the news.

The outperformance shows the value of SLBs as a hedge for investors, and should promote attractive pricing for issuers that bring ambitious SLB structures to market.

About the authors

Patricia Hutchinson

Patricia was previously an Associate Director of Research at AFII.

Josephine Richardson

Managing Director, Head of Research

Based in London, Jo leads AFII’s research and a global team supporting fixed income investors as they align their portfolios with climate and sustainability goals. She joined AFII after 18 years in fixed income markets at JPMorgan.