Client Alerts
Landmark ABP Deal Achieves First Amendment of LIBOR Legacy Bond to New Alternative Rate
By Joyce Sophia Xu, Michael L.Spafford, Diona N. Park, Daren F. Stanaway & Matthew S. Smith
On June 11, 2019, the transition away from the London interbank offered rate (“LIBOR”) benchmark crossed a key threshold as Associated British Ports (“ABP”), the U.K.’s biggest port operator, became the first borrower to successfully secure consent from its bondholders to amend £65 million ($82.7 million) in floating-rate debt due in December 2022 to reference an alternative benchmark rate instead of LIBOR. With the anticipated discontinuation of LIBOR at the end of 2021, ABP proactively sought to amend the British pound sterling LIBOR-linked notes, which now will pay interest by reference to the sterling overnight index average rate (“SONIA”), a benchmark rate that U.K. regulators are keen to see replace LIBOR.
Due to the operational difficulties associated with consent solicitations and amendments to floating-rate notes, the Alternative Reference Rates Committee (the “ARRC”), in its recent recommended fallback language, included an “amendment approach” as an option for syndicated loans, but not for floating-rate notes.
The ABP amendment is a positive development in the global effort to shift away from LIBOR. According to the Federal Reserve Bank of New York, an estimated $1.8 trillion gross notional value of U.S. dollar LIBOR legacy notes and bonds exist globally.
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