10/03/2021
Despite the current market disruption, the countdown to the transition from LIBOR to risk-free rates continues
The transition from LIBOR to Sterling Overnight Index Average (SONIA) by the end of 2021 could affect local authorities in their capacities as lenders, borrowers and investors. The Working Group on Sterling Risk-Free Reference Rates recommended that there are clear contractual arrangements included in all new and refinanced LIBOR-referencing loans to facilitate conversion ahead of the end of 2021 through a switch mechanism or agreed process of negotiation. As important for local authorities is the need to address historic facilities that are likely to have inappropriate switch language and will require collaboration and ultimately variation to effectively update.
Local authorities will need to understand and address how the change from LIBOR will affect both their own facilities and those granted too or from LA Companies. In order to understand your exposure you need to review existing contract terms and financial products that may have the LIBOR rate. Examples of arrangements local authorities should be reviewing are:
- existing loans from banks and funders;
- on-lending into subsidiaries, joint ventures and registered providers (amongst others);
- PFI and PPP financing agreements;
- commercial contracts with LIBOR linked default rates;
- bonds; and
- SWAP agreements.
For more information and a link to a recent webinar that explored the subject further see our latest Housing Finance Snapshot.
If you are interested in discussing your company’s potential exposure, please contact David Moore or Deborah Rowntree.
