UPDATE: Olam pricing SGD subordinated perpetual securities: client note

A palm oil tree at a plantation in IndonesiaA palm oil tree at a plantation in Indonesia

This item was originally published on Tuesday, 16 November 2021 at 12:39 p.m. SGT; it has since been updated to include more details of Olam’s indebtedness.

Olam International is pricing Singapore dollar-denominated subordinated perpetual securities, at a guidance level of around 5.368 percent,  according to a client note seen by Shenton Wire.

The note said the quantum of the issuance is not determined, but Olam has already issued S$400 million in perpetual securities at 5.375 percent (ISIN code: SGXF39597590) and the new notes will be fungible with the existing ones.

Pricing will include accrued interest from 18 July 2021 through the new securities’ settlement date, which is expected to be 23 November, the note said.

The securities, which will be in denominations of S$250,000, will be callable in 2026, and the minimum investment is S$250,000, the client note said.

The reset date will be on 18 July 2026, with the reset distribution to be based on the prevailing five-year SOR plus 4.807 percent plus the step-up margin of 200 basis points from the first call date, the client note said.

The note said the proceeds will be used for debt refinancing and/or other purposes.

The notes, which will only be senior to Olam’s ordinary shares, will be issued under Olam’s US$5 billion EMTN program, the client note said.

HSBC is the lead manager and bookrunner.

The bond pricing follows Olam’s statement Monday it obtained a multi-tranche revolving credit facility of a total US$1.25 billion. The two-tier facility includes a multi-year revolving credit facility of US$1.025 billion and a three-year term loan facility of US$225 million, Olam said in a filing to SGX. The proceeds of the credit facility will be used to refinance existing loans, Olam said.

In its 2020 annual report, Olam said its gross debt at year-end was $14.16 billion, up S$1.08 billion on-year, while its net debt was S$11.04 billion at end-2020, up S$1.14 billion on-year. Olam said at the time that the increase was due to higher deployment of working capital.

“This caused net gearing to increase from 1.50 times to 1.72 times, but still under our net gearing ceiling of 2.0 times. Adjusting for readily
marketable inventories and secured receivables, our net gearing would be 0.63 times, which reflects the true indebtedness of the group,” Olam said in the annual report.

Olam said the working capital increase was due to acquisitions and organic volume growth, higher prices across multiple commodities and the impact of Covid-19 on some commodities and regions, resulting in shipment delays and less supplier credit.