Juan Giraldez

Cleary represents Uruguay in sustainability bond offering

Cleary Gottlieb has represented the Republic of Uruguay (Uruguay) in an offering of US$700,000,000 5.750% sustainability-linked bonds due 2034.

The issuance of the Bonds constituted a reissuance of the US$1,499,975,998 outstanding 5.750% sustainability-linked bonds due 2034 initially issued on 28 October 2022. The offering was priced on 6 November 2023.

Sustainability-linked bonds are designed to motivate issuers to meet ambitious sustainability targets, which are measured by key performance indicators (KPIs).  Unlike green bonds and other ESG-labelled bonds, the proceeds of these offerings are not earmarked for specific projects.  In contrast, sustainability-linked bonds provide that if the specified KPI is not achieved, the issuer will be subject to an increase in the coupon rate of the bond.

With the issuance of the 5.750% sustainability-linked bonds maturing in 2034, Uruguay became the first issuer to include a coupon reduction if it exceeds pre-defined targets at a certain threshold.  The targets contemplated by Uruguay’s bonds include (i) achieving a reduction in aggregate greenhouse gas emissions, expressed in CO2 equivalent per unit of real GDP, by 2025 compared to 1990 and (ii) maintaining or increasing the area of native forest covering Uruguay’s territory by 2025 compared to 2012.

BNP Paribas Securities, Goldman Sachs & Co. and Scotia Capital (USA) acted as underwriters.

Cleary’s team included partner Juan Giráldez (pictured), associate Ignacio Lagos, and international lawyer Juan Ignacio Leguízamo. Counsel Matthew Brigham, associate Nathaniel Pribil, and law clerk Julia Huang provided advice on NY tax matters. All lawyers are based in New York, except Juan Giráldez who is based in Sao Paulo.

L Giselle Estrada