RGE closes US$1 billion sustainability-linked loan tagged to a sustainability-linked derivative
ROYAL Golden Eagle (RGE) has closed a US$1 billion sustainability-linked loan (SLL) with a tenure of three years 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, said the pulp, paper and palm oil giant on Wednesday (Jan 24).
This marks RGE’s foray into sustainability-linked Islamic financing and is intended to serve as a catalyst for the company’s expansion into regions such as the Middle East.
Murabaha is an Islamic financing structure in which the seller and buyer agree to the cost and markup of an asset.
RGE also added a US$1 billion sustainability-linked derivative (SLD) to its SLL. It’s an interest rate swap that will allow RGE’s subsidairies to fix its interest rate for the full sum of the loan interest rate.
The US$1 billion SLD is also linked to the company’s achievement of the same pre-defined key performance indicators (KPIs) as the SLL. If these environmental performance targets are not met, the company will need to pay back a pre-agreed amount to the banks.
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The SLL will be used to finance RGE’s agribusiness’ operations, growth and expansion across its product offerings in the bioeconomy. It is also tied to sustainability KPIs, which include enhancing engagement with the number of suppliers carrying out independent traceability verification, utilising renewable and clean energy sources, and collaborating with suppliers that are compliant with no deforestation, no peat and no exploitation policies.
The SLD would also be tied to the same KPIs. This means that if RGE fails to meet its sustainability targets, they would not only have to pay a higher rate on their SLLs, but also face a step-up rate for the SLD.
RGE said that this latest SLL was provided by a consortium of eight financial institutions as mandated lead arrangers and bookrunners. It received subscription offers 1.4 times the US$1 billion amount.
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The eight banks appointed are the Commercial Bank of Dubai, E.SUN Commercial Bank, First Abu Dhabi Bank, Hua Nan Commercial Bank, Industrial Bank, MUFG, Shanghai Pudong Development Bank and Bank of Communications (Hong Kong).
MUFG is the lead sustainable finance adviser on the transaction. The Japanese bank and the Commercial Bank of Dubai were joint SLD coordinators, and First Abu Dhabi Bank served as the Islamic adviser.
This is the second time RGE has secured an SLL alongside an SLD.
In February last year, it closed a US$550 million SLD with MUFG, which would allow the company to partially hedge the interest rate risk of a US$787 million SLL it secured in November 2022.
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