Gunvor has closed a US$745mn secured borrowing base facility that includes performance commitments related to its sustainability targets. This means the interest rate of the loan will be dependent on the company’s year-on-year improvements in areas such as transparency, governance and the environment.
Gunvor claims to be the first energy commodity trader to close such a facility, which will see it receive a discount on its interest if its sustainability targets are met. Vice-versa, a premium will be added to the interest if it underperforms on these targets.
This initiative will serve as a test run for a more expanded future programme for the company’s financings, Gunvor says.
While Gunvor is the first energy trader to ink such a loan, it follows in the footsteps of other major firms operating in the commodities space. Earlier this year, agribusiness conglomerate Olam secured a sustainability-linked revolving credit facility, worth US$500mn, the pricing of which will be reduced if it meets certain performance criteria. Commodity house Wilmar similarly tapped the market for a such a facility in 2017, in the palm oil sector.
Gunvor’s sustainability targets are focused on the environment, social impact and governance, and specifically address areas such as reductions in CO2 emissions, waste and water management, improvements to personnel safety at its refineries, transparency reporting related to feedstock origination, among others.
A Gunvor spokesperson tells GTR that a third-party assurance service provider, as agreed between the trader and its banking partners, will be assigned later in the year to monitor these targets.
The loan was arranged by ING, which acted as sole co-ordinator and active bookrunner, as well as security and facility agent and fronting bank. ING was also the lead bank on the Olam and Wilmar facilities.
Participating banks in the Gunvor facility include ABN Amro, CA Indosuez, Credit Suisse, DBS Bank, KfW Ipex-Bank, Mizuho, MUFG Bank, Nedbank, Rabobank, Raiffeisen, Société Générale, Sumitomo Mitsui Trust Bank and UniCredit.
“ING is happy to be Gunvor’s partner in its sustainability journey. We expect this innovative transaction will serve as an example of how we and our peers can provide energy commodity trading clients with financial solutions which also address the key sustainability challenges in this sector,” says Patrick Arnaud, managing director for trade commodity finance at ING.
The deal renews a facility originally closed at US$625mn in 2012 to cover the working capital requirements of the company’s Antwerp and Rotterdam refineries. It was significantly oversubscribed through the addition of new lenders.
“By partnering with our banks to set goals that achieve substantive results, we are demonstrating the seriousness with which we integrate sustainability into our business,” says Jacques Erni, Gunvor Group CFO.
Related savings from the potentially lower interest rate will go to supplement funding for the recently launched Gunvor Foundation, the company’s not-for-profit entity dedicated to philanthropic giving.