Thursday, 10 September 2020

Burberry raises new funds to boost sustainability drive

Many companies are raising cash at present but this week, Burberry has taken a new approach to do and tapped debt markets for the first time in its history but in a way that focused on ethics and sustainability.

It launched a sustainable bond to help its liquidity but also stressed that the money will be ring-fenced to be used to boost its eco-drive.

As well as being the first sustainability-labeled bond issued by the company, it’s also a first for a luxury business. 

The company has a heavy focus on ethics and sustainability. Since a scandal in 2018 that showed it was burning tens of millions of pounds worth of unsold stock, it has doubled down on its eco-activities and this bond adds to that process.

Burberry said it will diversify the firm’s sources of funding, "introducing long-term financing into the company’s capital structure".

The business has applied to be rated by Moody’s and expects the bond to be rated Baa2 (Stable Outlook).

But is this a sign of a company in dire need of cash? Not really. The company said it “has a conservative capital allocation policy and already holds substantial liquidity”. 

Following the outbreak of Covid-19, earlier in the year, it drew down its £300 million revolving credit facility (RCF) and issued £300 million of short-dated commercial paper under the Bank of England’s COVID Commercial Financing Facility (CCFF), with a maturity in March 2021. The RCF drawings were repaid in full in the first quarter of its latest financial year.

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