Shell plc signs innovative $10b revolving credit facility

ROYAL Dutch Shell Plc has signed a $10 billion revolving credit facility. The new facility replaces Shell’s existing $8.84 billion revolving credit facility and is provided by a syndicate of 25 banks.

The oil giant said in anticipation of the cessation of the London Interbank Offered Rate (LIBOR), this is one of the world’s first credit facilities linked to the new Secured Overnight Financing Rate (SOFR). Also, in a first for Shell, the interest and fees paid on the facility will be linked to Shell’s progress towards reaching its short-term Net Carbon Footprint intensity target, as published in its Sustainability Report.

“We are delighted to support the transition to new benchmark interest rates with this, market leading, syndicated SOFR facility,” said Russell O’Brien, Group Treasurer at Shell. “This is an innovative deal which also demonstrates Shell’s broad-based commitment to reducing the Net Carbon Footprint of the energy products we sell. We appreciate the strong support and commitment from our relationship banks.”

Shell has set an ambition to reduce the Net Carbon Footprint of the energy products it sells by around 50 per cent by 2050 and by 20 per cent by 2035 in step with society as it moves towards meeting the aims of the Paris Agreement. Shell has also set a three-year target to reduce its Net Carbon Footprint by 2-3 per cent by 2021 as compared to 2016.

The $10 billion unsecured revolving credit facility consists of a five-year, $8 billion revolving credit facility, and a one-year $2 billion facility. Each facility includes two one-year extension options at the discretion of each lender.

Bank of America and Barclays Bank acted as joint co-coordinators for the facility.

The banks that participated in the facility includeANZ, Bank of China, Banco Santander, BNP Paribas, Citibank, Credit Agricole Corporate and Investment Bank, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, Industrial and Commercial Bank of China, JP Morgan, Lloyds Bank, Mizuho Bank, Morgan Stanley, Natixis, Royal Bank of Canada, Sumitomo Mitsui Banking Corp, Société Générale, Standard Chartered Bank, TD Securities, UBS and Wells Fargo participated in the facility.

A revolving credit facility is a committed bank loan facility which allows a company to borrow funds at short notice if required, while SOFR is calculated as a volume-weighted median of transaction-level tri-party repo data collected from various market sources and published by the New York Federal Reserve Bank.

Under the terms of the deal, the LIBOR interest rate will be replaced by SOFR as early as the first anniversary of the signing date of the revolving credit facility, once the bank market is fully prepared for SOFR as an underlying rate.

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