British American Tobacco signs £6 billion SONIA and SOFR linked revolving credit facility

Notes to Editors

•  SONIA is based on actual transactions and reflects the average of the interest rates that banks pay to borrow sterling overnight from other financial institutions. SONIA is administered by the Bank of England.
•  SOFR is calculated as a volume-weighted median of transaction-level tri-party repo data collected from various market sources and published by the Federal Reserve Bank of New York (New York Fed).
•  Under the terms of the facility, the LIBOR interest rates for sterling and USD will be replaced by SONIA and SOFR respectively on the first anniversary of the signing date, or (if LIBOR cessation has not occurred) at a future date determined by BAT once the bank market is fully prepared for the transition to the alternative reference rates.
•  Following the transition, it is anticipated that interest will be calculated by reference to screen rates specified by the parties. The terms of the facility allow the parties to elect to use the SOFR Averages or SOFR Index as published by the NY Fed and, as and when they become available, similar screen rates for compounded SONIA.
•  The facility will also be available for drawing in euros, and euro drawings will continue to be based on EURIBOR.
•  On 2 March 2020, the New York Fed began publishing 30, 90 and 180-day SOFR Averages as well as a SOFR Index, in order to support a successful transition away from USD LIBOR. The Bank of England released a Discussion Paper in February 2020 seeking views from sterling market participants on its intention to publish a daily SONIA Compounded Index and the usefulness of the bank publishing a simple set of compounded SONIA Period Averages.
•  If a screen rate is not available, interest will be calculated by compounding SONIA and SOFR daily in arrears with a 5-day observation shift between the reference period and interest period.
•  Interest periods have been limited to 1 month following the transition, and a fixed spread adjustment between LIBOR and SONIA and SOFR has been agreed and documented.
•  This announcement will help move forward official sector led efforts to transition the sterling and US dollar LIBOR markets to their alternative reference rates. The Working Group on Sterling Risk Free Reference Rates’ targets to cease new issuance of sterling LIBOR linked securities by end Q3 2020.