Air France-KLM sold a debut sustainability-linked bond worth E1b on Monday, giving the European credit market its first major high-yield deal. The French airline launched the sale of a three-year E500m bond and a five-year E500m bond after holding investor meetings last week. It set the coupon for the three-year at 7.25% and the five-year at 8.125%, yielding 7.375% and 8.25%. Orders for the three-year bond exceeded E1.4b and totalled around E1.3b for the five-year paper, according to a memo seen by Reuters. The bonds are unrated, but are classified as high yield given their coupon. In comparison, the ICE BofA HY index was quoted at close on Friday at a price of 310 basis points (bps) for a yield of 7.1%, according to Refinitiv data. A sustainability-linked bond is a type of instrument whose financial features are based on whether the company selling the bond meets sustainability metrics within a certain timeframe. If the firm fails to meet them, the interest that it pays on the bond increases. The Air France-KLM debut bonds form part of the firm’s Sustainability-Linked Bond (SLB) framework, the first one from the aviation sector. Under it, the group commits to reduce emission intensity by 10% by 2025 and by 30% by 2030. The bonds will be partially used to repay the French State guaranteed senior bank loan that was granted to the group in May 2020 to help it navigate the COVID-19 pandemic. In a note published on Monday, Anthropocene Fixed Income Institute said “the Air France-KLM SLB issuance is a positive step in towards supporting its climate transition, delivering greater transparency and a commitment to reducing emissions, while providing financial benefits for investors.”<br/>