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The LIBOR transition is well under way with little to no sign of any delay caused by the current pandemic that has shaken global markets; the cessation of LIBOR as a benchmark for GBP interest rates is still scheduled for the end of this year.
The Working Group has recommended that from the end of Q1 2021, GBP LIBOR should no longer be used in any new lending that matures after the end of 2021. In addition, by the end of Q1 2021, all legacy GBP LIBOR contracts expiring after the end of 2021 that can be actively converted should be identified and converted where viable through to completion by the end of Q3 2021.
If your business currently has lending and/or hedging referenced to GBP LIBOR, you should already have heard from your bank with regards to the transition to SONIA later this year.
There are areas of the transition that require attention and expertise. One such example is GBP LIBOR loans that have floors within the agreement and how this can affect your hedging when transitioning into SONIA, as well as the impact of the new ISDA IBOR Fallbacks Protocol, active since 25th January 2021 for any new ISDA and hedging put in place after that date.
We are seeing a recent spike in volume of new SONIA loans across a range of banks as well as SONIA hedging (with both lending and independent banks – please click here to view our article on independent interest rate caps). Whether your lending is currently referenced to LIBOR or SONIA, we will be able to assist with the transition and/or hedging.
Please get in touch with any questions you may have and a member of our team will be able to assist you. You can reach us on 0207 183 2277 or at info@vedantahedging.com.
