Agribusiness group Olam International Limited has secured Singapore’s first club loan pegged to the Singapore Overnight Rate Average (SORA) with DBS Bank and the Singapore branch of Industrial and Commercial Bank of China.
The S$200 million (US$145.31 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 the US dollar.
The loan with a cross-currency swap option marks yet another milestone in the nation’s transition into the new interest rate benchmark for the Singapore dollar cash and derivatives markets.
Undertaken by Olam with its wholly owned subsidiary, Olam Treasury Pte. Ltd., the loan facility’s interest rate comprises two components: a compounded daily SORA rate calculated in arrears and an applicable margin. SORA is a backward-looking overnight rate as compared to forward-looking reference rates commonly used for loan facilities in Singapore, such as the SGD Swap Offer Rate (SOR) where the interest rate is determined at the start of the interest period. To determine the interest rate of a SORA-based loan facility, the daily SORA rates are compounded in arrears and the interest rate is determined by the end of the relevant interest period.
Proceeds from the loan will be used for 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.