RGE, a Singapore-headquartered multinational group of resource-based manufacturing companies, has closed a three-year, US$1 billion ($1.34 billion) sustainability-linked loan (SLL) for its sustainable agribusiness group, consisting of Asian Agri and Apical.
The SLL includes a US$150 million Murabaha term facility that is compliant with Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) standards, which marks RGE’s inaugural sustainability-linked Islamic financing, says the group on Jan 24.
Murabaha, also known as cost-plus financing, is an Islamic financing structure in which the seller and buyer agree to the cost and mark-up of an asset.
RGE, also known as Royal Golden Eagle, says the US$1 billion SLL garnered “strong support” from its financing partners, comprising a consortium of eight mandated lead arrangers and bookrunners, and was 1.4 times oversubscribed.
The eight appointed institutions are Commercial Bank of Dubai PSC (CBD), E.SUN Commercial Bank, Ltd., First Abu Dhabi Bank PJSC, Hua Nan Commercial Bank, Ltd., Industrial Bank Co., Ltd, MUFG Bank, Ltd., Shanghai Pudong Development Bank Co, Ltd. and Bank of Communications (Hong Kong) Limited.
MUFG is the lead sustainable finance advisor on the transaction. CBD and MUFG are joint SLD coordinators, and First Abu Dhabi Bank is the Islamic adviser.
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The US$1 billion SLL will be used to support RGE’s agribusiness operations, growth and expansion. “Through this transaction, RGE has fortified relationships with existing financing partners and established new partnerships with a number of financial institutions in the Middle East,” says the group.
The SLL is also tied to key performance indicators (KPIs), such as renewable energy use, engaging with suppliers carrying out independent traceability verification and collaborating with suppliers that have committed to No Deforestation, No Peat and No Exploitation, or NDPE.
If the group fails to meet the KPIs, it will have to pay a higher interest rate on the loan.
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To hedge against interest rate risks, RGE has added a sustainability-linked derivative (SLD) — an interest rate swap for its SLL.
The US$1 billion SLD is also linked to the company’s achievement of the same pre-defined KPIs as the SLL. If these environmental performance targets are not met, the company will need to pay a pre-agreed amount to the banks.
RGE secured its first SLL in 2021 and has committed to 100% of its financing needs to SLLs. As at end-2023, RGE has successfully secured more than US$1 billion in SLLs.
Patrick Tan, head of banking at RGE, says: “This transaction is meaningful in three ways. First, it is testament to the confidence that our financing partners have in our growth story, and in the positive impact we continue to make on our sustainability journey. Second, the inaugural sustainability-linked Islamic financing further strengthens our relationships with Islamic financial institutions in the Middle East and shows our continued support for the region’s growth in green financing. Finally, our US$1 billion SLD, tied to the same KPIs as our SLL, is an innovative and green way of hedging interest rate risk. It also demonstrates our commitment to continue to deliver on our sustainability KPIs.”
RGE counts more than US$35 billion in assets and 70,000 employees, with operations in Indonesia, China, Brazil, Spain and Canada.
Asian Agri is one of Indonesia’s largest palm oil producers. Founded in 1979, the company today manages 100,000 hectares of plantation land and employs over 20,000 people. According to the company, all its plantations in North Sumatra, Riau and Jambi provinces have been 100% RSPO (Roundtable on Sustainable Palm Oil) certified.
Apical is a vegetable oils processor active in Indonesia, China and Spain. It operates eight refineries, four biodiesel plants, four oleochemical plants and three kernel crushing plants. Through its joint ventures, Apical runs processing and distribution operations in India, Pakistan, Philippines, Vietnam, Myanmar, Brazil, Dubai and the US.
