Best Sustainable Treasury Solution Highly Commended: Thai Union Group PCL

Published: Jan 2024
Photo of Cynthia Tchikoltsoff, BNP Paribas.

Photo of Cynthia Tchikoltsoff, BNP Paribas.

Yongyut Setthawiwat

MD – Group Treasurer
Thai Union logo

Founded in 1977, Thai Union Group is a Thailand-based producer of seafood products.

in partnership with

BNP Paribas logo

Blue Finance sets the benchmark for Thai Union Group

The challenge

Thai Union Group’s diversified procurement and production approach gives the company flexibility to optimise its worldwide supply chain so it can deliver top-quality products to customers across markets in a timely and cost-effective manner. The company aims for supply chain excellence in its global sourcing and production platforms.

“Our measurable sustainability strategy, called SeaChange®, will help us achieve our vision in becoming the world’s most trusted seafood industry leader. So when it comes to financing, sustainability is also uppermost in our approach. In today’s business world, sustainability includes ESG financing. The fusion of finance and sustainability is a major shift, emphasising the need for profits while reducing environmental and social impacts.

At Thai Union, SeaChange® is integrated into our business, including in financing. This collaboration involves financiers, consumers and manufacturers, each with a vital role. Financiers support sustainable projects, consumers boost the demand for ethical products, and manufacturers adopt eco-friendly practices across the supply chain. This transformation highlights that sustainability is a collective duty, one that Thai Union believes will transform the seafood industry.

The award we received today is recognition of the positive impact our efforts are having. This recognition will raise awareness and foster cooperation throughout the industry, as we hope,” explains Yongyut Setthawiwat, MD – Group Treasurer.

The solution

The company had explored ESG financing previously and, in most cases, found a need to track the proceeds of ESG financing to specific types of projects it had identified, and which qualified for such financing. Furthermore, based on the sustainability requirements where certain projects are uncertain in terms of timing and size (eg not large-scale projects), the tracking of such projects created additional burdens on Thai Union’s finance operations, which it wanted to avoid.

Loans and/or bonds, where the interest is linked to the achievement of pre-agreed sustainability KPIs, were a good fit with the company’s sustainability objectives and its corporate profile. The proceeds of such finance can be used for general corporate purposes, which suited Thai Union very well.

In 2021 the company set a target to have at least 50% of long-term financing as sustainable finance and will expand to other financial products ie working capital, derivatives, etc.

With this clear objective, Thai Union started to issue sustainable finance as follows:

November 2020 – February 2021: Thai Union decided to move in parallel on two loan syndications in Thailand and Japan.

January 2021: Thai Union was the first company to launch a sustainability linked syndication loan (SLL) in Thailand, with a five-year loan for THB6,500m (equivalent to US$210m).

February 2021: the first time the company had accessed the Japan market by launching a five-year Samurai SLL for US$183m equivalent.

July 2021: Thai Union launched the first ever sustainability linked bond (SLB) in Thailand, a seven-year bond for THB5,000m (equivalent to US$150m). This was after the Securities Exchange Committee announced new rules and regulations allowing SLBs to be issued in Thailand.

November 2021: Thai Union launched a five-year and ten-year SLBs in Thailand for a total amount of THB6,000m (equivalent to US$180m). The main objective was to build momentum for the market and to extend to other tenors to cover different groups of investors.

December 2021: the company launched the second Samurai SLL in Japan, a five-year SLL for JPY14,000m (equivalent to US$135m). Thai Union went back to the market after it successfully obtained an A- credit rating from the Japan Credit Rating Agency (JCR). This rating is the same credit rating assigned to Thailand’s sovereign foreign currency debt and it has helped Thai Union to set the new interest benchmark in the market.

With these five financing executions, Thai Union should achieve 50% of long-term loans for sustainable finance. The company has been overwhelmingly welcomed by the market with more than double over-subscriptions for all five transactions. Thai Union also set an ambitious target to converts 75% and 100% of its long-term financings from traditional finances to be sustainable finances by year 2025 and 2030 respectively.

Best practice and innovation

This is the first time the company has connected sustainability aspects into its financing activities and introduced KPIs to monitor the arrangements.

Collectively, the company refers to these SLLs and SLBs as ‘Blue Finance’ since the objectives of the financing and proceeds are to benefit the oceans and seafood industry.

Key benefits

  • Supports company’s sustainability strategy.

  • Return on investment (ROI).

  • Quality accreditation achieved.

  • Company can inform its customers, suppliers and other stakeholders it has moved towards ‘Blue Finance’.

Leveraging Thai Union’s existing sustainability-linked financing framework, BNP Paribas successfully extended the sustainability-linked arrangements, based on KPIs and sustainable performance targets to Thai Union’s existing working capital facility. The receivables purchase programme for Thai Union Group Public Limited and its subsidiaries allows the client to further align its financing facilities with its sustainability strategy. BNP Paribas continues to meet the needs of corporates in their green transition through offering different products and solutions under our unified sustainable finance framework.

in partnership with

BNP Paribas logo

The Adam Smith Awards Asia is the industry benchmark for best practice and innovation in corporate treasury. The 2023 awards attracted 450 nominations. To find out more please visit treasurytoday.com/adam-smith-awards-asia

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