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NatWest completes market’s first SONIA loan for National Express

Following the announcement on 17 June that NatWest is to offer the market’s first SONIA (Sterling Overnight Index Average) loans, the bank has announced this week the delivery of its first SONIA loan for its corporate customer, National Express Group PLC.

National Express is a leading public transport operator with bus, coach and rail services across the UK, Europe, North Africa, North America and the Middle East, delivering nearly 900 million journeys in 2018. The loan has been provided as a committed Revolving Credit Facility. Ashurst LLP acted as legal adviser to the bank in this transaction.

The loan is the first in the pilot the bank is running with a small number of customers, before launching the product to the wider market later this year in response to calls from the Financial Conduct Authority (FCA) to accelerate the transition away from LIBOR (London Interbank Offered Rate) to Risk-Free Rates by the end of 2021.

Taking methodology already used in the sterling public bond market, SONIA will be applied using daily compounding with a five-day reset lag, and represents the convention of choice by the market so far.

Bhavin Shah, Head of LIBOR Transition for Commercial Banking at NatWest, said: “Financial markets have already seen an initial shift towards SONIA as a reference rate, such as the bond amendment recently carried out by Associated British Ports, where NatWest Markets acted as Solicitation Agent.

“As the UK’s biggest supporter of businesses, it’s important that NatWest is at the forefront of this shift in the lending market. Since the FCA welcomed our initial announcement, we’ve seen high levels of interest from customers and across the wider industry. We are pleased to be working with National Express on the next stage of the transition away from LIBOR through this pilot.”

Simon Jenkins, Senior Director, Corporate Coverage at NatWest said, “We are delighted to have completed the first SONIA debt facility with National Express as part of our LIBOR transition pilot. The development of the SONIA lending market not only requires financial institutions to develop their products accordingly, but also requires corporates to be innovative in their approach and embrace SONIA-related change. By working in partnership with first movers such as National Express, NatWest is developing a range of solutions to support customers seeking to transition away from LIBOR.”

For more on the LIBOR Transition please visit https://www.rbs.com/rbs/libortransition.html

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