(Bloomberg) -- True Corp., Thailand’s largest mobile phone operator, is syndicating a maiden yen-denominated sustainability-linked loan in a bid to cut financing costs as dollar interest rates remain elevated, according to people familiar with the matter.

The ¥109.9 billion ($685 million) borrowing by the joint venture between global telecom firm Telenor ASA and Thai conglomerate Charoen Pokphand Group will partially refinance a more expensive $2.3 billion bridge facility signed in September, the people said. That bridge loan had backed the merger of Telenor’s local unit Total Access Communication Pcl and True that had created the JV, according to the people, who asked not to be identified discussing private matters.

The new three-year loan pays an interest margin of 85 basis points over the Tokyo Overnight Average Rate, or TONA, the people said. That compares with the jumbo financing, which offered an opening interest margin of 130 basis points over term Secured Overnight Financing Rate (SOFR), and would have stepped up to 200 basis points in its last few months. 

True’s latest borrowing is the first sustainability-linked loan—a type of financing that comes with commitments from borrowers to achieve certain environmental or social targets—denominated in the Japanese currency from a Southeast Asian corporate this year.

It follows a slew of such deals in 2023 as the region’s borrowers turned to cheaper funding options. Southeast Asia had approximately ¥338 billion in yen loans raised last year, up from ¥239 billion in 2022, according to data compiled by Bloomberg. 

While recent steps by the Bank of Japan to normalize monetary policy include lifting its benchmark interest rate out of its eight-year long negative territory to 0% to 0.1% in March, all that has been dwarfed by the Federal Reserve’s interest rate hikes, from just above zero in 2022 to a rate range of 5.25% to 5.50% since July 2023. 

Fed policymakers signaled at a recent June meeting there would be just one reduction in the rates in 2024, indicating that the high cost of dollar-denominated borrowings is here to stay for a while longer.

In May, True raised 15 billion baht ($407 million) from a bond offering for debt repayment and business expansion purposes. Meanwhile, the telco’s $2.3 billion two-year bridge financing, which was the largest dollar syndicated loan from Thailand from last year, also includes a 8.5 billion baht portion, according to the people. 

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