RGE, a Singapore-headquartered multinational group of resource-based manufacturing companies, has closed a three-year, US$1 billion sustainability-linked loan (SLL) for its sustainable agribusiness group. This consist of the Asian Agri, one of Indonesia’s largest palm oil producers, and Apical, a vegetable oils processor with operations located in Indonesia, China and Spain.
The SLL, which includes a US$150 million murabaha term facility that is compliant with the Accounting and Auditing Organization for Islamic Financial Institutions principles, marks RGE’s inaugural sustainability-linked Islamic financing. With the proceeds, the group aims to bolster its ongoing expansion into key regions, including the Middle East.
With more than US$35 billion in assets and 70,000 employees, RGE is a significant producer of sustainable natural fibres, edible oils, green packaging and clean natural gas.
The US$1 billion SLL will be used to support the company’s agribusiness operations, growth and expansion across its product offerings to further contribute to the bioeconomy.
It is also tied to key performance indicators (KPIs) designed to enhance engagement with the number of suppliers carrying out independent traceability verification, use of energy derived from renewable and clean energy sources, and collaboration with “no deforestation, no peat, no exploitation”- compliant suppliers.
To fully hedge the interest rate risk of the SLL, RGE also added a sustainability-linked derivative (SLD), an interest rate swap, for its SLL. The US$1 billion SLD is also linked to the company’s achievement of the same pre-defined KPIs as the SLL. If these environmental performance targets are not met, the company will need to payback a pre-agreed amount to the banks.
The eight mandated banks are Commercial Bank of Dubai (CBD), E.SUN Commercial Bank, First Abu Dhabi Bank (FAB), Hua Nan Commercial Bank, Industrial Bank, MUFG Bank, Shanghai Pudong Development Bank and Bank of Communications (Hong Kong). MUFG is the lead sustainable finance adviser on the transaction, with CBD and MUFG acting as joint sustainability-linked derivative coordinators, and FAB as the Islamic adviser.
“This transaction further strengthens our relationships with Islamic financial institutions in the Middle East and shows our continued support for the region’s growth in green financing,” says Patrick Tan, RGE’s head of banking. “Finally, our US$1 billion SLD, tied to the same KPIs as our SLL, is an innovative and green way of hedging interest rate risk.”