Indonesian agribusiness Apical Group has secured its first sustainability-linked loan, borrowing US$750mn from a consortium of 22 banks led by First Abu Dhabi Bank (FAB).
Apical, a major processor of palm oil, says the transaction is “one of a few” deals within the sector where borrowing is linked to sustainability performance. It says incentives will be awarded in relation to predetermined targets across its supply chain.
The company says metrics are assessed by Environmental Resources Management (ERM), a London-based consultancy firm that has previously worked with Deutsche Bank in Asia and Africa.
The loan is structured as a two-year revolving credit facility as well as a four-year term loan. It was issued to two Apical units – Apical Middle East and AAA Oils & Fats – and will be used to finance working capital and capital expenditure requirements.
Mandated lead arranger and facility agent FAB is joined by E.Sun Commercial Bank, Mega International Commercial Bank, MUFG Bank, Bank SinoPac and Taishin International Bank as mandated lead arrangers and bookrunners.
The other 16 banks are not named, but Apical says the consortium includes representatives from nine countries.
Pratheepan Karunagaran, Apical’s executive director, describes the transaction as “a milestone” for its environmental performance.
“We are grateful for the enthusiasm of our financiers and hope that our success will serve as a catalyst in further developing sustainability-linked financing in the sector,” he says.
FAB’s acting head of global corporate finance, Fawaz Abusneineh, adds that environmental sustainability is “an increasing focus for borrowers” and says Apical is “amongst the first names in Asia, and companies in its industry sector, to embrace this”.
Indonesia is the world’s largest producer of palm oil, but has come under heavy pressure from environmental groups over the devastating impact the industry has had on the country’s forests. Concerns include widespread deforestation and the destruction of the critically endangered orangutan’s natural habitat.
A government moratorium on new palm oil permits imposed in 2018 – an attempt to boost production from existing cultivated areas – expired in September this year and has not been renewed.
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