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APAC (ex-Japan) syndicated/club loan borrowers slow in switching rate benchmark in 2021; Singapore tops in alternative rates

Asia Pacific (ex-Japan) borrowers have been slow at transitioning away from LIBOR, with only USD 4.36bn syndicated and club loans linked to the Secured Overnight Financing Rate (SOFR) completed in 2021 – just a fraction of the USD 227bn USD-denominated loans raised from the region during the year.

In 2021, USD 4.57bn-equivalent deals, denominated in various other currencies, used other alternative benchmarks including Singapore Overnight Rate Average (SORA), Sterling Overnight Index Average (SONIA), Tokyo Overnight Average Rate (TONA) and Taiwan interbank US dollar lending rate (TAIFX). At least USD 9.09bn loans linked to SOFR or other benchmarks are currently in the pipeline in the region.

Singaporean companies completed the biggest aggregate amount of such loans with USD 3.79bn-equivalent in 2021, followed by Australia and India with USD 2.90bn and USD 1.35bn, respectively.

Singapore-based food and agri-business Olam International was the first-ever company in the region to have completed a club deal pegged to SORA, raising SGD 200m in September 2020, while the first SOFR-linked deal emerged in October 2021 when Australian financial-services provider Macquarie Group raised a USD 1.5bn facility linked to SOFR and a GBP 900m loan tied to SONIA, and state-owned Indian infrastructure company REC Ltd completed an SOFR-based USD 75m loan.

Several Chinese companies launched novel SOFR-linked deals in 2021, including carrier-neutral data-center provider Chindata Group Holdings’ up-to USD 500m loan, biotechnology company 3SBio Inc’s USD 250m USD/HKD loan and drug and medical-equipment distributor Jointown Pharmaceutical Group’s USD 150m loan.

Vietnam Technological & Commercial Joint Stock Bank’s USD 700m multi-tranche loan and Philippines conglomerate San Miguel Corp’s up-to USD 750m loan are also among the first in their respective countries to launch SOFR-based loans.

In September last year, the Asia Pacific Loan Market Association (APLMA) and Treasury Markets Association (TMA) jointly published a note setting out options available in the loan market for replacing USD LIBOR.