SINGAPORE: Food and agri-business Olam International Limited (Olam) has secured Singapore’s first club loan pegged to the Singapore Overnight Rate Average (SORA) with DBS Bank (DBS) and Industrial and Commercial Bank of China, setting the pace for the industry’s future syndicated SORA loans.
The SGD200 million one-year committed revolving credit facility is also the industry’s first SORA-pegged club loan coupled with a cross-currency swap. This gives Olam 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 SGD proceeds into USD.
The SGD200 million 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.
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 markets.
Undertaken by Olam with its wholly owned subsidiary, Olam Treasury Pte. Ltd. (OTPL), the loan facility’s interest rate comprises two components: (1) a compounded daily SORA rate calculated in arrears and (2) an applicable margin.
Olam’s Managing Director and Group CFO, N Muthukumar, said: “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.”
Ms Tan Su Shan, Group Head, Institutional Banking Group at DBS, noted that the loan adds to industry momentum in the shift towards SORA as the new interest rate benchmark in the 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. 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.
“We look forward to supporting our clients in the transition. One of the ways we do that is by working with our industry peers to offer SORA-pegged financing solutions as they partner their clients to tap on SORA financing early. We believe that this will help facilitate a smoother transition to the new interest rate benchmark.”
Mr Andrew Ng, Group Head, Treasury & Markets at DBS said that the SORA-USD cross-currency swap shows DBS’ continued commitment to develop innovative SORA-based derivatives. “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.”
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.”
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.
Olam International is a leading food and agri-business supplying food, ingredients, feed and fibre to 25,200 customers worldwide. Our value chain spans over 60 countries and includes farming, processing and distribution operations, as well as a sourcing network of an estimated 5 million farmers.
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