Agri-food giant Olam International has obtained Singapore's first club loan pegged to the Singapore Overnight Rate Average (Sora).
A club loan is a type of syndicated loan with more than one party providing the financing. In this case, the loan comes from DBS Bank and the Industrial and Commercial Bank of China, Singapore branch.
Olam has 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 Singdollar proceeds into United States dollars, noted a joint statement yesterday.
The loan and the cross-currency swap mark another milestone in Singapore's transition towards adopting Sora as the new interest rate benchmark for Singdollar cash and derivatives markets, it added.
The loan facility's interest rate comprises two components - a compounded daily Sora rate calculated in arrears and an applicable margin.
Proceeds will be used for general corporate purposes for Olam and its subsidiaries.
Olam managing director and group chief financial officer N. Muthukumar said the loan provides Olam with "the flexibility to remain adaptable and future-ready itself as we embrace the industry's shift towards mainstream adoption of the new benchmark for the cash and derivatives market in Singapore".
Ms Tan Su Shan, head of DBS' institutional banking group, added: "By adopting Sora-based financing ahead of the market, forward-looking companies such as Olam are... 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."
Earlier this month, the Monetary Authority of Singapore said it will step up supervisory engagement to ensure that banks here are well prepared to transition from the Swap Offer Rate (SOR) - a key interest rate benchmark - to Sora by the end of next year.
Singapore banks began a two-year transition from SOR to Sora last year as the scandal-tainted London Interbank Offered Rate is due to meet its end after next year.
A banking industry report in July also recommended that the Singdollar Singapore Interbank Offered Rate be discontinued in three to four years, and that Sora be used as the main benchmark for Singdollar financial markets.
THE BUSINESS TIMES