Barclays seeks bondholder approval to switch to Sonia from Libor

By Sarah Lizee

Olympia, Wash., March 4 – Barclays Bank UK plc is seeking approval from holders of its £1.25 billion series 2018-1 floating-rate covered bonds due January 2023 (ISIN: XS1746306585) to change the interest basis to Sonia from Libor, according to a notice.

The UK Financial Conduct Authority confirmed that it will no longer persuade or compel banks to submit rates for the calculation of the Libor benchmark after the end of 2021 and expects that some panel banks will cease contributing to Libor panels at such time.

In addition, the Bank of England and the FCA announced that it mandated a working group to promote a broad-based transition to Sonia across sterling bond, loan and derivative markets, so that Sonia is established as the primary sterling interest rate benchmark by the end of 2021.

Therefore, the continuation of Libor on the current basis cannot and will not be guaranteed after 2021, and regulators have urged market participants to take active steps to implement the transition to Sonia and other risk-free rates ahead of this deadline.

On the basis that the final maturity date of the series 2018-1 bonds falls after 2021, the issuer convened a meeting for the purpose of enabling the covered bondholders to consider the proposal by way of an extraordinary resolution.

Due to the differences in the nature of Libor and Sonia, the replacement of Libor as the reference rate will also require corresponding adjustments to the existing margin payable on the bonds.

If the extraordinary resolution passes, the interest rate for the bonds will be equal to Sonia plus the sum of 0.22% and the Libor versus Sonia interpolated basis. Pricing will be set at or around 8 a.m. ET on March 26.

The meeting is set for 5 a.m. ET in London on March 26. The voting deadline is 11 a.m. ET in March 23.

If the extraordinary resolution passes, the modifications to the bonds will take effect on April 9.

Lucid Issuer Services Ltd. (+44 20 7704 0880, +44 20 3004 1590, barclays@lucid-is.com) is the tabulation agent.

The bank is based in London.

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