SINGAPORE – Singaporean banks are launching more lending products indexed to the Singapore Average Overnight Rate (Sora), helping to transition to Sora as the new benchmark interest rate.
Sora, which is the average rate for unsecured overnight singdollar interbank transactions, is a retrospective rate that offers more stability than the two commonly used forward-looking forward rates – the Singapore Interbank Offered Rate (Sibor) and the Offer Singapore Exchange (SOR).
United Overseas Bank and real estate giant CapitaLand announced on Thursday (September 3) that they had signed a two-year, $ 200 million term loan indexed to both the Singapore average rate (Sora) and the finance rate. guaranteed on a day-to-day basis (SOFR).
The double-tranche loan is the first of its kind in Singapore, UOB and CapitaLand said in a joint statement on Thursday.
The interest rate on the two tranches of the loan will be based on the averages composed of the daily Sora and SOFR, both calculated in arrears, and with the respective applicable margins.
The proceeds of the loan will be used for the general needs of CapitaLand.
The loan facility precedes a global shift from offered interbank rates, including the London Interbank Offer Rate, to risk-free alternative rates. Alternative risk-free rates are overnight interest rates based on actual transactions and are considered to be more transparent and more representative of market conditions.
Through this collaboration, UOB and CapitaLand aim to build market confidence in the adoption of Sora, which in turn will help accelerate the transition from using SOR to Sora.
“This is in line with the initiatives of the Monetary Authority of Singapore to support the adoption of Sora as a key interest rate benchmark in Singapore and the development of dynamic and robust Sora markets,” they added.
CapitaLand was the first company in Singapore to secure a Sora-based loan. In June, it signed a loan facility agreement with OCBC Bank for a three-year $ 150 million business loan.
Also on Thursday, DBS Bank launched a corporate mortgage indexed to Sora which it said was the first in Singapore.
The new package gives business owners additional real estate financing options and covers all types of real estate loans. It also marks a further step in Singapore’s transition to adopting Sora as the primary benchmark interest rate for the Singdollar cash and derivatives market.
The new loan is designed for small and medium-sized enterprises (SMEs) looking to finance their commercial and industrial properties. Interest rates will be based on the three-month Composite Sora issued by the Monetary Authority of Singapore, as well as an applicable margin.
Joyce Tee, DBS Group Head of SME Banking, noted that although demand for new commercial real estate has plummeted, the bank has seen sustained interest from the SME community in real estate refinancing solutions in an economic context. hard.
“DBS’s new Sora-indexed commercial real estate loan offers SME owners the opportunity to refinance their mortgage loans on more competitive terms,” she said.
Small business owners can borrow up to 80% of the value of their property and choose to extend their repayment term up to 25 years.
Ms Tee added that with the industry moving towards a gradual discontinuation of Sibor and adoption of Sora, DBS is giving business owners the ability to pre-subscribe to a Sora-related package “for save them the hassle of remapping their loans along the way.
Last month, DBS launched the first Sora loan in the agribusiness sector, as well as the first Sora loan in the sector coupled with an interest rate swap.
Corrective note: An earlier version of this article did not give an accurate description of Singapore’s average overnight rates. We are sorry for the mistake.