Agri commodities conglomerate Olam has returned to the sustainable finance table with the signing of a new US$525mn revolving credit facility (RCF), the pricing of which will be reduced if it meets certain environmental, social and governance performance criteria.
The facility consists of three tranches – a one-year, US$315mn RCF, a two-year RCF of US$105mn and a three-year RCF of US$105mn, all of which will be used to refinance existing loans of Olam and its subsidiaries.
ANZ, Bank of Nova Scotia and Rabobank are acting as senior mandated lead arrangers, while BBVA, DBS, Santander, Barclays, HSBC and Standard Chartered are mandated lead arrangers. Rabobank and HSBC have been appointed as the sustainability co-ordinator and facility agent respectively.
The interest margin on the facility is linked with the achievement of certain improvement targets that have been identified as part of Olam’s sustainability strategy. The targets cover farmers’ and food systems’ prosperity, local communities, and what Olam calls “regeneration of the living world.”
These performance indicators will be tracked and reported by Olam’s corporate responsibility and sustainability team. Ernst & Young will independently assess the achievement scores by performing agreed-upon-procedures that have been approved by the banks. Should Olam meet all of its targets, it will see a reduction in the pricing, which has not been disclosed. GTR has learned that the initial all-in pricing for the facility is consistent with Olam’s previous financing of a similar tenor – that is, market rate for an RCF.
This is the second such deal for Olam, which last year closed Asia’s first sustainable club loan, and the latest in a growing number of sustainability-linked loans in the region. In July this year, Chinese commodities trader Cofco International closed a similar, albeit much larger, transaction that includes margins savings based on the firm’s performance against environmental, social and governance targets. This came on the heels of agricultural commodity giant Wilmar’s renegotiation of its RCF with lender DBS, with terms reduced if it hits sustainability targets.