Spread adjustment meaning

In this issue: Sustainable finance and ESG round-up LIBOR and benchmarks Security Sustainable finance Debt capital markets Securitisation and structured products Regulation for banking lawyers Sanctions Daily and weekly news alerts New and updated content Latest Q&A Useful information Sustainable finance and ESG round-up For a summary of this week’s Sustainable finance and ESG developments, see: Sustainable finance and ESG weekly round-up—17 October 2024. LIBOR and benchmarks Standard Chartered Plc v Guaranty Nominees Ltd and other companies [2024] EWHC 2605 (Comm) Standard Chartered (the Claimant) had issued perpetual preference shares whose dividends referenced the three-month USD LIBOR. Following the cessation of LIBOR publication, prompted by the contraction of the unsecured interbank lending market, the Claimant proposed switching the dividend calculation to a Compound Secured Overnight Financing Rate (SOFR) plus the International Swaps and Derivatives Association (ISDA) Spread Adjustment, but did not secure the requisite 75% approval. The court determined...

In this issue: LIBOR and benchmarks Lending Security Sustainable finance Real estate finance Debt capital markets Derivatives Regulation for banking lawyers Sanctions Daily and weekly news alerts New and updated content Useful information LIBOR and benchmarks LMA publishes recommended forms for euro exposure drafts with EURIBOR fallbacks The Loan Market Association (LMA) has issued recommended-form versions of single-currency euro exposure drafts that embed €STR-based fallbacks. The templates include the International Swaps and Derivatives Association (ISDA)/Bloomberg EURIBOR-€STR Spread Adjustment, streamlined temporary fallbacks, and drafting for Central Bank Rate Adjustment. The LMA has also updated its Users Guide to explain the two-tier waterfall framework, how the reference rates clause operates, and the requirements for Italian law compliance. These updates will apply across all LMA documentation that references euros. See: LNB News 03/07/2025 55. Source: LMA—Documents & Guidelines alerts archive. Lending Ciddy Ltd v Natalia [2025] EWHC 1616 (Ch). The Chancery Division...

Standard Chartered plc v Guaranty Nominees Ltd and other companies [2024] EWHC 2605 (Comm) What are the practical implications of this case? In a notable ruling for the banking and finance sector, the High Court implied a term into an offering circular for preference shares, providing that a ‘reasonable alternative rate’ would apply after the cessation of USD LIBOR. The circular had linked dividends to three‑month USD LIBOR. Although it set out fallbacks for occasions when LIBOR was not published, those provisions proved unworkable once LIBOR ceased entirely. The court then addressed what the reasonable alternative ought to be, determining that CME Term SOFR together with the International Swaps and Derivatives Association (ISDA) Spread Adjustment—i.e., the rate published as synthetic USD LIBOR prior to 1 October 2024—was the most suitable rate on the facts. While the dispute focused on calculating dividend rates for preference shares, the decision is of broader interest to the finance market...

Relevant articles The Journal of International Banking and Finance Law provides a range of valuable pieces on the LIBOR transition for banking and finance lawyers, all accessible via this page... 1 January 2025 - Ending LIBOR: a landmark ruling on Tough Legacy contracts (2025) 1 JIBFL 14 Paul Sinclair KC, a barrister at Fountain Court Chambers, analyses the judgment in Standard Chartered PLC v Guaranty Nominees Ltd [2024] EWHC 2605 (Comm). After synthetic LIBOR ceased in 2024, Standard Chartered asked the court to allow replacement of LIBOR with a comparable rate. The court held an implied term was necessary for commercial efficacy. It approved CME Term SOFR with a spread adjustment as an objective substitute for LIBOR, strengthening contractual certainty for future matters, and highlighted the value of the Financial Markets Test Case Scheme in resolving core financial uncertainties... 1 August 2024 - Fixed rate loans: tough break (costs) for borrowers (2024) 8 JIBFL 510 Hodge Malek...

Stop press: LIBOR, including synthetic LIBOR, stopped being published after 30 September 2024. Please be aware that this Practice Note is no longer maintained. ARCHIVED: This Practice Note has been archived and is not updated. This Practice Note sets out targeted information on legislative measures proposed in the US, UK and EU to deal with tough legacy contracts arising from the discontinuation of the London Interbank Offered Rate (LIBOR). It: clarifies the meaning of ‘tough legacy contracts’ and why they pose difficulties outlines the legislative measures proposed in the UK, US and EU and the present state of that legislation assesses the extent to which those measures could resolve the tough legacy problem, with a specific emphasis on the UK, and contains a table contrasting principal features of the legislative measures Additional guidance on the LIBOR transition is available in: LIBOR transition toolkit Introductory guide to LIBOR transition Practice Note: Interest provisions in risk-free rate...

Banking & Finance glossary A Auditing and Accounting Organisation for Islamic Financial Institutions (AAOIFI) The foremost Islamic, international, autonomous, independent, not-for-profit corporate body that develops and issues accounting, auditing, governance, ethics and Shari’ah benchmarks and standards for Islamic Financial Institutions (IFIs) and the wider Islamic finance sector. Founded in Bahrain in 1991, it is backed by a number of institutional members across more than 45 countries, including central banks and regulatory authorities, financial institutions, accounting and auditing practices, and legal firms. Its pronouncements are currently applied by leading Islamic financial institutions across the world and have advanced a progressive and gradual harmonisation of global Islamic finance practice. It also delivers professional qualification programmes—notably Certified Islamic Professional Accountant (CIPA), Certified Shari’ah Adviser and Auditor (CSAA), and the corporate compliance programme—in efforts to strengthen the industry’s human capital and governance frameworks. For further details, see Practice Note: Key participants in the Islamic finance industry—Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI). Acceleration Acceleration is the formal action...