SINGAPORE – Global food and agri-business firm Olam International Limited (Olam) has secured a SG$200 million (US$145.33m) one-year committed revolving credit facility, a first in Singapore.
Billed as Singapore’s first club loan that is pegged to the Singapore Overnight Rate Average (SORA) with DBS Bank (DBS) and Industrial and Commercial Bank of China, Singapore Branch (ICBC Singapore), the facility is also the industry’s first SORA-pegged club loan coupled with a cross-currency swap.
The facility, according to Olam, gives the company the option to enter into a SORA cross-currency swap with DBS at the start of each interest period, giving added certainty on interest rates and swap SG$ proceeds into US$.
The loan facility’s interest rate, which is undertaken by Olam with its wholly owned subsidiary, Olam Treasury Pte. Ltd. (OTPL), comprises a compounded daily SORA rate2 calculated in arrears and an applicable margin.
“We are delighted to partner DBS and ICBC to pioneer the first SORA-based club-loan facility. This provides Olam with the flexibility to remain adaptable and future-ready itself as we embrace the industry’s shift toward mainstream adoption of the new benchmark for the cash and derivatives market in Singapore,” Olam’s Managing Director and Group CFO, N Muthukumar, said.
“By adopting SORA-based financing ahead of the market, forward-looking companies such as Olam are positioning themselves well by gaining an early understanding of how SORA works”Ms Tan Su Shan – Group Head, Institutional Banking Group at DBS
The SGD200 million (US$145.33m) SORA-based loan and the cross-currency swap marks yet another milestone in the nation’s transition roadmap set out by the Steering Committee for SOR Transition to SORA (SC-STS) towards adopting SORA as the new interest rate benchmark for the Singapore Dollar cash and derivatives markets.
“We are pleased to be able to work with Olam and ICBC to ink the industry’s first multi-bank SORA-based financing solution. We are also delighted that DBS has been able to lead in readying the SGD loan markets for future SORA-based club and syndicated loan facilities,” Ms Tan Su Shan, Group Head, Institutional Banking Group at DBS.
“By adopting SORA-based financing ahead of the market, forward-looking companies such as Olam are positioning themselves well by gaining an early understanding of how SORA works, and how to better tap SORA-based cash and derivatives markets as industry adoption grows and liquidity deepens.”
Given SORA’s growing importance as a key interest rate benchmark in SGD financial markets, it supports the Association of Banks in Singapore and the Singapore Foreign Exchange Market Committee (ABS-SFEMC)’s efforts to develop new SORA-based markets1.
“Developing cross-currency swap solutions help to deepen funding in various currencies including USD and will be critical in the smooth transition to the new benchmark. Working with sophisticated clients like Olam will allow confidence to grow in these products and encourage more participation from other corporates,” Mr Andrew Ng, Group Head, Treasury & Markets at DBS said
Proceeds from the loan will be applied towards general corporate purposes of Olam and its subsidiaries. DBS and ICBC have been appointed Mandated Lead Arrangers and DBS is the Sole Bookrunner and Facility Agent for the loan.
Ms Geng Hao, Deputy General Manager, ICBC Singapore, said “ICBC Singapore is pleased to partner with DBS in providing this SORA-based financing to Olam. Being the first Chinese bank to support this meaningful initiative, ICBC Singapore is committed to supporting MAS’ vision and providing quality banking services to the community.”
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