Olam bags $205m club loan allowing for demerger, IPO of Olam Food Ingredients

Olam International's club loan was sealed with DBS and the Singapore branch of ICBC. PHOTO: OLAM INTERNATIONAL

SINGAPORE (THE BUSINESS TIMES) - Olam International has secured a US$150 million (S$205.4 million) club loan, which could fund the proposed demerger and initial public offering (IPO) of its new operating group Olam Food Ingredients (OFI), which is into natural and sustainable food ingredients and solutions.

Announcing this on Tuesday (Dec 7), the Singapore-headquartered food and agri-business company said the facility agreement "allows for the carve-out, separation and proposed demerger and IPO of OFI as per Olam's reorganisation plan".

Olam had previously announced that OFI, which was created in early 2020, intends to seek a primary listing on the premium segment of the London Stock Exchange and a concurrent secondary listing in Singapore by the first half of 2022.

In its latest statement, Olam also said the proceeds from the facility will be used for "general corporate purposes of Olam and its subsidiaries".

The club loan was sealed with DBS and the Singapore branch of the Industrial and Commercial Bank of China (ICBC). It references the USD Secured Overnight Financing Rate, and has a one-year tenor with Olam Treasury as a co-borrower, Olam noted.

Group chief financial officer N. Muthukumar said the financing solution would aid Olam in the transition to "alternative risk-free benchmark rates" ahead of the impending discontinuation of the London Interbank Offered Rate, commonly known as Libor.

Libor, one of the most significant global benchmarks for calculating interest, is to be phased out by the end of this year.

In September 2020, DBS and ICBC Singapore signed the Republic's first club loan pegged to the Singapore Overnight Rate Average (Sora) with Olam. The $200 million facility was also the first Sora-pegged facility to be coupled with a cross-currency swap.

Shares of Olam closed one cent or 0.6 per cent lower at $1.71 on Monday.

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