The loan, which references both the Singapore Overnight Rate Average (SORA) and the Secured Overnight Financing Rate (SOFR), is the first of its kind in Singapore.
United Overseas Bank Limited (UOB) has entered into an agreement for a two-year S$200 million ($146.79 million) term loan with Singapore-based property developer CapitaLand, which will be used for general corporate purposes, the bank announced on Thursday.
The interest rate on the loan’s two tranches will be based on the compounded averages of daily SORA and SOFR, both calculated in arrears, the announcement said.
UOB's Singapore head of corporate banking Leong Yung Chee called the bilateral loan facility a «major step in driving the adoption of new benchmark rates for financial products in Singapore» and said the bank will continue to work closely with regulators, industry partners and clients for a smooth transition process.
Transition to SORA
As SORA and SOFR are overnight interest rate benchmarks based on actual transactions, they are more transparent and more reflective of market conditions. They have been identified by the relevant regulatory and industry bodies as the alternative benchmark rates to replace the Swap Offer Rate (SOR) in Singapore and the U.S. dollar London Interbank Offer Rate (LIBOR) respectively.
The Monetary Authority of Singapore is pushing for the adoption of SORA as a key interest rate benchmark in Singapore and the development of a vibrant and robust SORA market.
In June 2020, CapitaLand was the first company in Singapore to obtain a SORA-based loan from OCBC Bank.
