CapitaLand obtains two-year S$200m SORA-SOFR loan from UOB

UNITED Overseas Bank (UOB) and CapitaLand have entered into an agreement for a two-year S$200 million term loan which references both the Singapore Overnight Rate Average (SORA) and the Secured Overnight Financing Rate (SOFR).

The dual-tranche loan is the first of its kind in Singapore, the lender and the real estate giant said in a joint statement on Thursday morning.

The interest rate on the loan's two tranches will be based on the compounded averages of daily SORA and SOFR, both calculated in arrears, and with respective applicable margins.

Loan proceeds will be used for general corporate purposes, UOB and CapitaLand said.

The bilateral loan facility comes ahead of a global transition from Interbank Offer Rates, including the London Interbank Offer Rate (LIBOR), to alternative risk-free rates. Alternative risk-free rates are overnight interest rate benchmarks based on actual transactions and are seen as more transparent and more 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.

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Through the collaboration, UOB and CapitaLand aim to enhance market confidence in adopting SORA, which will in turn help accelerate the transition from the use of SOR to SORA.

"This is in line with the Monetary Authority of Singapore's initiatives to support the adoption of SORA as a key interest rate benchmark in Singapore and the development of vibrant and robust SORA markets," they said.

In June 2020, CapitaLand was the first company in Singapore to obtain a SORA-based loan. It inked the loan facility agreement with OCBC for a S$150 million three-year corporate loan.

DBS Bank said separately on Thursday that it has launched Singapore's first business property mortgage loan referencing the SORA. Interest rates on the new loan will be based on the three-month compounded SORA published by the MAS, as well as an applicable margin.

The SORA-pegged business property loan - which covers all property loan types - is specially tailored for small and medium enterprises (SMEs) looking to finance their commercial and industrial properties. SME business property owners can borrow up to 80 per cent of their property value and choose to stretch their repayment tenor to as long as 25 years.

As at 10.12am, DBS was trading down S$0.14 or 0.7 per cent to S$20.73, UOB edged up S$0.01 or 0.1 per cent to S$19.58, while CapitaLand put on S$0.01 or 0.4 per cent to S$2.78.