Needham Bank has closed a $25 million loan to an affiliate of SWEB Development USA for the development of a wind energy project in Maine.
The loan is based on the new CME Term SOFR (secured overnight financing rate), which will replace the current LIBOR standard, and includes a customized hedge to insulate the borrower from interest rate fluctuations. The debt facility also includes a customized repayment structure that will shadow the specific revenue generation of the project.
“As volatility erupted in the market based on Omicron fears, we knew it was in SWEB’s interest to close this loan immediately. And we’re thrilled we were able to adopt the new SOFR standard before its formal adoption on Jan. 1 by financial services firms,” says James Daley, SVP and director of structured finance. “We structured this loan with a payment schedule predicated on the sale of generated energy, and worked with Chatham’s Financial Institutions team to build in a customized hedge that will protect SWEB from rising interest rates.”
The project, when complete, will include five wind turbines in Clifton, Maine, that will produce 20 MW of clean energy and complement a nearby SWEB wind farm already in operation.
“Needham Bank was one of our first clients to embrace CME Term SOFR as a replacement for one-month LIBOR,” mentions Matt Tevis, managing partner and head of Chatham’s Global Financial Institutions Team. “Chatham’s SwapDesk worked closely with James Daley to structure and deliver a tailor-made hedging solution that focused on the custom cashflows and long-term financing needs of the deal, while also achieving the bank’s and the borrower’s interest rate risk management objectives.”