Barclays’ 2023 bondholders vote in favor of switching to Sonia

By Marisa Wong

Los Angeles, March 26 – Barclays Bank UK plc said it obtained the necessary votes to amend its £1.25 billion series 2018-1 floating-rate covered bonds due January 2023 (ISIN: XS1746306585).

An extraordinary resolution to amend the bonds passed with 100% of total votes cast by a quorum of bondholders in favor of the resolution, according to a press release.

A teleconference was held at 6 a.m. ET on March 26 in place of a meeting in London for holders to vote on amendments to the bonds, as previously reported.

The change was made in light of the ongoing Covid-19 pandemic and in order to comply with the measures proposed on March 16 by the U.K. government to combat virus transmission, including social distancing and the avoidance of all non-essential travel, Barclays had said.

The voting deadline was 11 a.m. ET on March 23.

As announced on March 4, the issuer is seeking to change the interest basis to Sonia from Libor, according to a notice.

The U.K. 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.

Because the extraordinary resolution passed, the interest rate for the bonds will be equal to 0.42%, which is the Libor versus Sonia interpolated basis plus 22 basis points. Pricing was set at 8 a.m. ET on March 26.

The changes 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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