UPL Corporation, the worldwide branch of agrochemicals giant UPL Limited, has secured a $700 million sustainability loan from international banks including Societe Generale, HSBC, and Italy's Intesa.
The loan funds will be used to repay a portion of the debt obtained to support the $4.2-billion purchase of Arysta Life Sciences in 2019. The loan is divided into two halves. The first $500 million component is repayable in five years, while the second $200 million component is repayable in two years.
A UPL spokesperson confirmed the fundraise when contacted.
UPL Corp had taken a $2.8-billion term loan to finance the acquisition of Arysta.
The new loans have an interest rate that is 40 basis points lower than the previous loan, which had an interest rate that was 160 basis points higher than the London Interbank Offered Rate (Libor).
The loan's final cost will be determined
by the company's ability to satisfy specified sustainability goals. According to reports, UPL Corp has pledged to educe CO2 emission has pledged to reduce CO2 emissions, water usage, and liquid and solid waste disposal.
The initial loan had a $1.5 billion amount and was due in 2023-24. The current crowdfunding campaign will provide UPL Corporation more time to repay a portion of the outstanding debt. The Indian parent's foreign activities are managed by the Mauritius-based UPL Corporation. UPL Corporation is owned by Abu Dhabi Investment Authority and TPG Capital, which hold a combined 22% of the company.
The Arysta acquisition propelled the firm into the top five global producers of crop protection chemicals, pitting it against multinational behemoths such as Syngenta and BASF. UPL and Arysta have a combined revenue of $5 billion. Reliance Industries recently obtained a $250 million green loan to repay a portion of the debt associated with its $771 million purchase of Norway-based REC Solar.
Bankers predict US dollar loans will grow more popular because they provide favourable interest rates and allow corporations to prepay without incurring penalties, something they would not be able to do if they raised funds through bond issuances.
Fitch Ratings changed the outlook on UPL Corporation's debt ratings from negative to stable in June of last year, stating that the company was on pace to lower its debt-to-Ebitda ratio to less than 3x by fiscal 2023. It assigned the company's securities a BBB- rating, the lowest in the investment grade rating matrix.
"The lock-in term for UPL Corp's minority investors Abu Dhabi Investment Authority and TPG Capital Asia, each holding an 11 percent ownership," Fitch said in a note. "They can then sell their holdings to UPL, which has first refusal, or to third parties." Increasing its investment in UPL Corp may considerably raise UPL's leverage, but we do not expect this to happen in the next three years."