In line with its digital transformation strategy, BBVA has launched a new form of corporate loan, the digital facility (D-Loan), and signed the first ever financing of this kind with Olam International, a leading food and agri-business company headquartered and listed in Singapore. As provider of this innovative solution, BBVA acted as digital advisor and coordinator under the new USD 350 million revolving credit facility. BBVA was also the facility agent for the other 6 banks that participate in the financing.
The digital loan (D-Loan) is a product created by BBVA, which aims at incentivizing corporates to accelerate their digital transformation, a topic currently occupying the minds of most CEOs.
The main innovation is that the price of the digital loan (D-Loan) is linked to the digital maturity of the borrower, in addition to its credit profile. The digital maturity is determined as a result of a thorough analysis performed by a reknown consulting firm, Boston Consulting Group (BCG) in the case of Olam. To reflect the digital readiness of the company, a digital score or rating is issued based on BCG’s Digital Acceleration Index (DAI) and used as a price adjustment factor. In practice, the borrower and the lenders agree on digital score targets to be reached during the life of the financing and if those targets are met, the company gains a reduction in the loan pricing. This is an important financial incentive to borrowers to significantly improve their digital maturity as fast as possible.
The in-depth analysis performed by an independent consultant, and revised annually, focuses on multiple dimensions of the company: priority given to digitalization within the organization; different initiatives and roadmap implemented; its digital marketing and operating model; digitalization of its core operations and governance structure; and how the organization fosters digital innovation.
As digital advisor and coordinator of the transaction, BBVA assisted Olam in the selection and hiring of the consultant; the required preparatory work for the consultant to perform its analysis; the review of the digital report; the structuring of the pricing adjustment mechanism related to the company’s digital maturity, and drafting of the digital related provisions of the facility agreement.
Ricardo Laiseca, BBVA’s Head of Global Finance, comments: “Our digital loan is yet another example of BBVA’s drive to innovate with and for its clients. We believe that companies that undertake a digital transformation will be the winners in their sector in the long term; Digitization translates into greater competitiveness and profitability, which will allow these companies to be ahead of the competition”.
"Digitization translates into greater competitiveness and profitability, which will allow these companies to be ahead of the competition”
Olam’s Executive Director and Group Chief Operating Officer, A Shekhar, says: “We are delighted to be a part of this pioneering effort along with our banking partners, to launch this first-of-a-kind facility that links the interest rate on the loan to achieving measurable annual digital improvement targets. This financing can be a good template to drive the agriculture sector’s digital transformation and is another example of Olam’s commitment towards our purpose of Re-imagining Global Agriculture and Food Systems.”
Michael Grebe, BCG’s Senior Partner and Managing Director, adds: “This innovative loan product incentivizes companies to increase their digital maturity and supports them to execute the digital transformation. The DAI creates the needed transparency to focus in the right areas”.
The main innovation is that the price of the digital loan (D-Loan) is linked to the digital maturity of the borrower
BBVA brings digital transformation to corporate loans
BBVA is a leading force in the transformation of the financial sector. In wholesale banking, BBVA is innovating both in its financing products and in the digitization of its solutions to enhance its business and corporate customers’ experience.
BBVA works with its corporate customers to offer, not only the most appropriate financial solutions, but also cutting edge innovation and technological capabilities. Some examples of its innovative nature are green financing solutions, blockchain pilots and the digital loan (D-Loan) linking its pricing terms to the digital score of the company.
BBVA’s wholesale banking unit is pioneering efforts to harness the advantages offered by the technology to increase the agility and transparency of its core products, such as corporate financing, and thus progress towards a Do It Yourself (or DIY) financing model for its business and corporate customers.
Olam International is a leading food and agri-business supplying food, ingredients, feed and fibre to over 22,000 customers worldwide. Their value chain spans over 60 countries and includes farming, processing and distribution operations, as well as a sourcing network of 4.7 million farmers. Through the purpose to ‘Re-imagine Global Agriculture and Food Systems’, Olam aims to address the many challenges involved in meeting the needs of a growing global population, while achieving positive impact for farming communities, planet and all stakeholders. Headquartered and listed in Singapore, Olam currently ranks among the top 30 largest primary listed companies in terms of market capitalisation on SGX-ST.