DBS completes Singapore's first USD SOFR-linked export financing transaction

DBS has completed Singapore's first export financing transaction referencing the US dollar (USD) Secured Overnight Financing Rate (SOFR) with food and agri-business, Bunge, the bank announced on Wednesday.

The transaction, worth US$25 million, was priced off SOFR averages and represents a significant milestone as the industry transitions away from the Ibor (Interbank Offered Rate).

The bank said this would enable clients to transition their trade financing instruments away from the USD Libor (London Interbank Offered Rate), ahead of the December 2021 cessation guidance issued by the Federal Reserve Board, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation.

DBS's group head of institutional banking Tan Su Shan noted that the bank has been engaging institutional clients to shift them towards alternative Risk-Free Benchmark Rates (RFRs).

To do so, the bank has partnered corporates in the international trade system to develop suitable trade financing solutions that reference new USD-pegged benchmarks.

"The global Ibor transition is a hugely complex endeavour, and we are leveraging our deep market expertise to help our clients make sense of these changes. We are pleased to partner forward-looking companies such as Bunge in pioneering trade financing instruments that are a fit for the new interest rate benchmark landscape," Ms Tan said.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

In its efforts to shift institutional clients to RFRs for the Singapore dollar cash and derivatives market, DBS also issued Singapore's first Sora (Singapore Overnight Rate Average) club loan coupled with a cross currency swap to Olam in September last year.

DBS has also begun pricing Singapore's first Sora-referenced floating rate note, launching Singapore's first business property mortgage loan referencing Sora, and executing Singapore's first Sora-referenced interbank option trade.

A third of all new SME (small and medium-sized enterprise) loans issued by DBS are now Sora-pegged, the bank said.