We will review the Neutral Capital Finance series 2 green bond in this article. Before we do that, let’s first get to know the company offering the said bonds.
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Who is Neutral Capital Finance?
Neutral Capital Finance is a company established in 2019 by Neutral Fuels to sell bonds on the latter’s behalf.
Neutral Fuels is a company that specializes in producing and distributing clean, sustainable biofuels made from used vegetable oil. The company was founded in Dubai, United Arab Emirates, in 2010 by Karl W. Feilder, an entrepreneur and sustainability advocate.
The idea for Neutral Fuels arose from Feilder’s concern about the environmental impact of fossil fuels, which are the primary source of energy in the transportation sector. Feilder saw an opportunity to use waste cooking oil, which is typically discarded by restaurants and food service providers, as a renewable source of fuel.
Neutral Fuels uses a proprietary process to convert used cooking oil into biofuel, which can be used as a drop-in replacement for petroleum diesel in vehicles and equipment.
For the next five years, Neutral Fuels wants to raise more money by going public and listing on the Nasdaq Dubai or the Abu Dhabi Stock Exchange.
Neutral Capital Finance Series 2 Green Bond Offering
What are green bonds?
Green bonds are a type of bond that is issued to finance projects with environmental benefits. Neutral Capital Finance’s green bonds are issued to support the development of renewable energy infrastructure and other sustainable energy projects.
How do green bonds work?
Green bonds work in a similar way with traditional bonds in that they are a debt instrument that pays interest to investors over a specified period of time, and at the end of the term, the issuer repays the principal amount.
However, green bonds have an additional requirement that the proceeds are used for environmentally friendly purposes. This is usually verified by a third-party certification process that ensures the project meets predefined environmental criteria.
Neutral Capital is applying for Climate Bond Initiative certification.
What are the terms of Neutral Capital Finance series 2 green bond offering?
The series 2 green bond that Neutral Capital Finance is currently offering is an asset-backed senior secured bond in the renewable energy industry. The green bond, set to mature in 2026, has an interest of 7.25% per annum and are freely transferable. The annual coupon is paid on a semi-annual basis.
The bonds are listed on both Frankfurt Stock Exchange and Cayman Islands Stock Exchange.
An aggregate 50 million USD of green bonds are being issued under the second bond offering, which is part of Neutral Capital Finance’s larger bond scheme worth 250 million USD to finance the buildout of Neutral Fuels’ operations in the future. This will include purchase of equipment, establishment of new biorefineries, and funds for operation losses in the short term.
The assets of the new biorefineries will serve as collateral for the series 2 green bonds.
Neutral Capital Finance’s first bond offering has been entirely subscribed and amassed 12 million USD. The five-year notes were listed on the Global Exchange Market in Ireland and in Frankfurt, with an interest rate of 8.25% per year. So far, all coupon payments have been fulfilled on schedule.
How would your investment look like in five years?
With a 7.5% coupon, you could potentially earn 18,125 USD per year for an investment of 250,000 USD; 36,250 USD per annum for an investment of half a million dollars; and 72,500 USD yearly for an investment worth 1 million USD.
How can investors access Neutral Capital Finance’s green bonds?
The series 2 green bonds can be purchased directly from private banks and all main stockbrokers, as well as through Capital International Group, Custodian Life, TIP, Gravitas, and Exante.
You can also subscribe in the offering through Undertakings for Collective Investment in Transferable Securities (UCITS), individual savings account (ISA), Strategic Investment Priority Plan (SIPP), small self-administered schemes (SSAS), qualifying recognised overseas pension scheme (QROPS), portfolio bonds, and other investment platforms.
What are the pros and cons of investing in Neutral Capital Finance series 2 green bonds?
Socially responsible investment
Investing in Neutral Capital Finance’s green bonds allows investors to support sustainable projects and contribute to a more environmentally friendly future. This aligns with the values of many socially responsible investors.
Green bonds can provide investors with a way to diversify their portfolios and reduce their exposure to traditional bonds and equities, so long as they comprise just a small part of a larger portfolio.
May offer more stability than other types of investments, as they are typically backed by high-quality issuers and have lower default rates.
This investment provides a fixed rate of return, which can give investors a steady income stream.
May offer lower yields than other types of investments.
The market for green bonds is smaller than that of traditional bonds, which can make it harder to sell the bonds if an investor needs to liquidate their investment.
Limited track record
The green bond market is relatively new, and there is limited historical data available to gauge performance over the long term.
As with any investment, green bonds carry risks, such as interest rate risk, inflation risk, and credit risk.
Investing in Neutral Capital Finance series 2 green bonds can bring additional value to your portfolio. Just remember the basics of investing, such as diversifying your assets, assessing your personal tolerance to risks, and take note of both advantages and disadvantages of an offering.
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