Oslo-listed Odfjell has become the first shipping company to sell a sustainability-linked bond (SLB) in a NOK 850m ($100m) deal on Thursday.

The chemical tanker company said it was also the first firm in the whole Nordics region to issue this kind of debt, which will help refinance an $82.5m balloon payment on earlier bonds due this month.

Odfjell told TradeWinds last week that it was aiming to raise at least $60m.

The issue was substantially oversubscribed, however.

SLBs are different to green bonds, which have to be used to finance specific eco-projects.

Odfjell chief financial officer Terje Iversen told TradeWinds SLBs have no restrictions or limitations on what the money is used for.

"With green bonds, it's difficult to know what funds are funding what. You have to demonstrate that that dollar is used for a green purpose," he said.

"An SLB framework is much more suitable for the business we are running," he added.

The SLB redemption price after four years is linked to the company's ambition to reduce carbon intensity of its controlled fleet by 50% by 2030 compared with the 2008 level.

The issue carries a coupon of three-month Nibor plus 5.75%, with quarterly interest payments.

Cheaper finance?

Iversen said the SLBs are not necessarily more expensive. In fact, because there was such interest and the sale was over-subscribed by two times, the company found itself in a lower interest band, he added.

At the end of the term, there will be a 1.5% penalty if the company does not meet its own targets.

Odfjell has used class society DNV's framework to measure its ESG performance.

"This is not something only Odfjell is cooking up and sending in some numbers, they are really testing us and verifying the numbers," Iversen added.

"We are very excited. We are the first ones doing this and I would say it was quite a success, but I'm sure other companies will follow, both in the bond market and in traditional financing within shipping."

The deal has been more than a year in the making.

Iversen said talks began with banks as the company discussed its ESG targets.

"A few banks indicated this could be of interest to them as well, and the wider finance community," he added.

Many meetings

There were also many meetings last year with potential investors to test their appetite.

Iversen said there was particularly strong interest from Swedish and Finnish bond investors and funds, which may not have been able to invest in traditional bonds.

"This was quite an early indicator for us that if we include such a feature they could be interested," he added.

Odfjell will use SLBs in the future, both for bonds and traditional mortgage financing.

"We think especially the traditional shipping banks are also eager to have this framework included in future financing for vessels and similar," Iversen told TradeWinds.

He said the company now has "quite a good liquidity buffer".

Excess cash could be used to look at refinancing its more expensive borrowings, lowering leverage and the cost of capital.