Linklaters advises ABP in test case for reform in LIBOR to SONIA switch

Associated British Ports (ABP), the biggest port operator in the UK, has today received consent from bondholders to switch the benchmark underpinning its £65m floating rate notes due 2022 from LIBOR to SONIA.

ABP has exposure to GBP LIBOR across a range of financial instruments and today’s consent is the first of its kind for the UK market as organisations start transitioning to new benchmarks.

The UK’s Financial Conduct Authority has indicated that it will not use its powers to persuade or compel banks to submit contributions for LIBOR after the end of 2021. Work is therefore underway to transition away from LIBOR and towards risk-free rates across financial markets globally.

In the UK, the Working Group on Sterling Risk-free Rates has chosen SONIA as the preferred alternative risk-free rate for Sterling. The Working Group, together with the wider market, is developing market conventions for SONIA-linked bonds.

Mark Nuttall, partner at Linklaters, who advised ABP, said: “This is an important transaction as we start to see borrowers planning their transition away from LIBOR. It’s not a straightforward process and the industry is working hard to find solutions to address the concerns about how the alternatives may work.”

The Linklaters team advising ABP was led by partner Mark Nuttall, Capital Markets counsel Arjun Muddu and associate Amelia Rice. The shift away from LIBOR is unlike any previous regulatory reform and Linklaters is working with a number of industry bodies and organisation to provide for orderly transitions from LIBOR – see more here.