Air France-KLM has issued a EUR 1bn Sustainability-Linked Bond. It is the first benchmark high yield deal of the year.

The deal was received well – 2.6 times subscribed (total orders of EUR 2.6bn), and paves the way for other European high yield issuers.

The unrated transaction is structured in two tranches – a 3.3-year 7.25% coupon EUR 500m bond and a 5.3-year 8.125% coupon EUR 500m bond. Both tranches were issued at a discount, providing yields of 7.375% for the 3-year and 8.25% for the 5-year.

The bond’s coupons are indexed to the group’s target to reduce its well-to-wake scope 1 and 3 jet fuel greenhouse gas emissions by 10% per revenue tonne kilometer by 2025.

Air-France-KLM’s Firm’s Sustainability-Linked Bond (SLB) framework is the first for the airline sector. It commits to reduce greenhouse gas emission intensity by 10% by 2025 and 30% by 2030. The airline’s SLB framework is based on the International Capital Markets Association (ICMA)’s Sustainability Linked Bond Principles.

Air France-KLM received a Second Party Opinion from Moody’s rating the bonds as having a “Significant contribution to Sustainability”.