Wilmar, DBS ink agribusiness industry's first Sora-pegged loan

SINGAPORE (THE BUSINESS TIMES) – Agri-food giant Wilmar International has obtained a $200 million corporate loan pegged to the Singapore Overnight Rate Average (Sora), from DBS.

At the start of each interest period, Wilmar will also have the option to enter into a Sora interest-rate swap.

This is the Singapore agribusiness industry’s first Sora loan, the two companies said in a joint press statement on Thursday.

Its interest rate comprises a compounded daily Sora rate calculated in arrears and an applicable margin.

The new loan and the interest-rate swap are in line with the country’s roadmap for the development of new Sora-based markets.

DBS’s group head of institutional banking Tan Su Shan said the latest facility “builds momentum” to facilitate the industry’s transition towards adopting Sora as the new interest-rate benchmark for the Singapore dollar (SGD) cash and derivatives markets.

“Forward-looking companies like Wilmar are positioning themselves for the future by tapping Sora financing early.

“This means they will have a greater understanding of how Sora works and will be at the forefront of innovative Sora-based financing solutions as market adoption increases,” Ms Tan added.

Wilmar’s chief financial officer Charles Loo said the loan will put the agri-food company “in good stead to ride the wave of interest-rate reforms and drive better understanding and greater adoption of risk-free rates in general, which is more stable and robust”.

As for the interest-rate swap, DBS group head of treasury and markets Andrew Ng said it shows the bank’s commitment to increase liquidity in Sora-derivatives.

This will allow clients like Wilmar to continue to hedge their loan exposures and facilitate a smoother transition into the new benchmark, he noted.

Earlier this year, DBS priced the issue of a Sora-referenced floating rate note.

The new interest rate environment will be more robust, according to Ms Tan, as Sora is underpinned by a deep and liquid overnight interbank funding market.

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.

In August 2019, it was announced that Singapore will move from the SGD SOR to Sora. This comes as the London Interbank Offered Rate (Libor) will be discontinued by end-2021, which will affect SOR as it uses the US-dollar Libor in its computation.

Earlier this month, the Monetary Authority of Singapore said it will prescribe the Sora as a financial benchmark under the Securities and Futures Act, as well as enhance its transparency and data availability.

Shares of mainboard-listed Wilmar rose $0.07 or 1.6 per cent to trade at $4.42 as at 10.25am on Thursday. Nearly eight million shares had changed hands, and the counter was the top traded by value on the bourse.

Meanwhile, DBS fell $0.18 or 0.9 per cent to $20.50 after about 1.5 million shares were traded, making it the second-most actively traded by value in the morning.

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