The bonds are structured such that they will be retired from future cash flows in which the rights, privileges and benefits derived from the concession contract for the provision of the fleet concluded between the concession Patio Calle 80 and the Empresa de Transporte del Tercer Milenio – Transmilenio S.A. (“TMSA”). Likewise, the structure has a contingent liquidity line from the FDN for up to 12% of the total issue value, to cover debt service and the costs of sustaining the issue.

The bonds were 160% oversubscribed.

This operation is part of FDN’s work to seek new sources of financing for the country’s infrastructure, helping to close market gaps and promote the development of capital markets as a viable alternative for the financing of infrastructure projects.

According to the FDN, this is the first time in Colombia that a bond issuance meets the eligibility criteria established in the Sustainability Bond Guidelines, promoted by the International Capital Market Association (ICMA). Sustainalytics, a global leader in corporate governance research, qualification and analysis in environmental, social and responsible investment strategies, issued the second opinion validating compliance principles of green bonds and social bonds, since funding resources are directed to activities that contribute to pollution prevention and control, clean transport and improvement of affordable basic infrastructure.

Alianza Fiduciaria was the transaction management agent, and Alianza Securities and Credicorp Capital were the placing agents.

In order to minimize the risk of the operation and incentivize the best quality in the provision of the service, the new concession model for Phase I and II of Transmilenio separated the procurement process into two components: the purchase and provision of the bus fleet on one hand, and the operation and maintenance of the fleet and maintenance yards by the other.  Under the new model, specialization, knowledge and efficiency were sought both in the purchase of buses and in their operation and maintenance, as well as the management of the maintenance facilities. In addition, the concession sought to minimize operational risk, improve the quality of service for users, facilitate the achievement of financing for the acquisition of the fleet and ensure the sustainability of the system.

According to Davivienda, this was the largest issuance of green bonds ever made by a private Latin American financial institution. The move aligns with the bank’s push to increase its project financing for sustainable initiatives that aim to mitigate the impact of climate change. “Everything is framed within our sustainability strategy,” said Efraín Forero, president of Davivienda.

Specifically, the company says it is looking to finance projects focused on renewable energy, green construction, reducing carbon dioxide emissions, energy efficiency, and water management. Davivienda believes such projects will help Colombia on its quest to reduce national emissions that contribute to climate change by 20% by 2030.

“Davivienda is taking a new step that will help develop the green bond market in Colombia and Latin America,” said Irene Arias, IFC’s director for Latin America and the Caribbean. “The company is committed to the fight against the factors that cause climate change, and with our acquisition of this issuance, IFC is demonstrating the importance of green bonds for financing sustainable projects.”

Overall, IFC says it has identified climate-focused financing opportunities in Latin America and the Caribbean that could total more than $1 trillion USD by 2040. More than $25 billion USD of these potential projects could come from renewable energy initiatives in Colombia alone, according to the organization.

Photo: Davivienda’s headquarters in Bogotá. (Credit: Jared Wade)