Tue, Oct 20, 2020 – 10:58 AM
OCBC on Tuesday said it has extended a three-year S$100 million corporate loan referencing the Singapore Overnight Rate Average (SORA) to Sembcorp Financial Services, a wholly-owned subsidiary of Sembcorp Industries (SCI).
This is the first SORA-based loan in the energy sector and is another step by OCBC to contribute to Singapore's development of the SORA markets, the lender said.
The S$100 million SORA-pegged loan is part of a S$300 million loan extended by OCBC to SCI. Its interest rate, referencing SORA, has two components – a compounded average of daily SORA rates calculated in arrears plus an applicable margin.
The compounded average SORA will be calculated in arrears, using the "five-business day backward-shifted observation period" methodology, OCBC noted.
The latest facility comes after OCBC collaborated with CapitaLand on Singapore's first SORA-based corporate loan in June this year and subsequently introduced the first SORA-based retail home loan in July.
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Singapore is transitioning from the use of the Singdollar Swap Offer Rate (SOR) to SORA, as the scandal-tainted London Interbank Offered Rate (Libor) will be phased out by end-2021. Libor's demise will affect SOR, as the latter uses the US-dollar Libor in its computation.
SORA is the average rate of unsecured overnight interbank Singdollar transactions brokered in Singapore. It is a backward-looking overnight rate, as opposed to the forward-looking reference rates commonly used for loans in the Republic, such as the SOR where the interest rate is determined at the start of the interest period.
In August 2019, the Association of Banks in Singapore and the Singapore Foreign Exchange Market Committee identified SORA as the most suitable interest rate benchmark to replace the SOR.
Graham Cockroft, SCI's group chief financial officer, said: "Beginning the process early is especially important for corporates like us, where we have multiple loan facilities referencing the various interbank offered rates and SOR, which will eventually transition to their respective new interest rate benchmarks."
Elaine Lam, OCBC's head of global corporate banking, said the SORA-based loan represents a "milestRead More – Source