United Overseas Bank Limited (UOB) and CapitaLand have, on September 3, entered into an agreement for a two-year loan $200 million term loan.
The dual tranche loan references both the Singapore Overnight Rate Average (SORA) and the Secured Overnight Financing Rate (SOFR), making it the first of its kind in Singapore.
The interest rate on both tranches will be based on the compounded daily averages of daily SORA and SOFR, both calculated in arrears. The loan proceeds will be used for general corporate purposes.
The bilateral loan facility comes as the globe transitions from interbank offer rates to alternative risk-free rates (RFRs), which are more transparent and reflective of market conditions.
SORA and SOFR have been identified by the relevant regulatory and industry bodies as the alternative benchmark rates to replace the Swap Offer Rate (SOR) in Singapore and the US Dollar LIBOR respectively.
On August 5, the Monetary Authority of Singapore (MAS) announced four key initiatives to speed up greater activity in SORA markets, and enhance market confidence in the newly-introduced benchmark rate.
On August 18, MAS became the first government entity to auction SORA-based notes as it moves away from the SGD Swap offer rate, which uses the London Interbank Offered Rate (LIBOR).
“The dual tranche SORA-SOFR loan facility is yet another milestone that reflects the strength of UOB’s longstanding relationship with CapitaLand. It is also a major step in driving the adoption of new benchmark rates for financial products in Singapore,” says Leong Yung Chee, head of corporate banking in UOB Singapore.
“With our first SORA-SOFR dual tranche structure, CapitaLand continues to proactively prepare for the global transition to alternative benchmark rates,” says Andrew Lim, group CFO of CapitaLand Group.
“As a globally diversified real estate company, CapitaLand’s early adoption of these new interest rate benchmarks across different currencies enables us to work with our key banking partners such as UOB, to ensure that the group’s ongoing transition of our loan book to alternative benchmark rates proceeds smoothly,” Lim adds.
Shares in UOB closed 4 cents lower, or 0.2% down, at $19.57, on September 2, while shares in CapitaLand closed 2 cents lower, or 0.7% down, at $2.77.
