Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

SONIA definition

What does SONIA mean? In legal practice, SONIA (Sterling Overnight Index Average) is the standard sterling risk‑free reference rate used in loan agreements, derivatives, bonds and securitisations to calculate interest and value sterling cashflows. Administered and published by the Bank of England, it measures interest paid on overnight, unsecured transactions in the sterling wholesale money market and is a benchmark within scope of the UK Benchmarks Regulation. The term itself is not generally defined in statute or case law; it is a market expression incorporated by contract. Following the transition from GBP LIBOR, SONIA is the primary replacement rate for sterling. Documentation typically references the...

Drafting interest provisions in LMA compounded RFR facilities: conventions, lookback, zero floors, credit adjustment spreads, fallbacks, market disruption, break costs and EURIBOR rate-switch mechanisms post-LIBOR

Published by a LexisNexis Banking & Finance expert

Practice notes

What does this Practice Note cover?

This Practice Note is designed to help practitioners grasp interest provisions in Loan Market Association (LMA) recommended form facilities agreements. It clarifies concepts, outlines the LMA position, and flags drafting considerations.

Summarises, in brief, what interest rate provisions mean within a loan agreement
Sets out how the LMA treats these points in its templates
Highlights the principal features of facilities referencing compounded risk-free rates (RFRs)
Defines switch mechanisms and offers guidance on the LMA standard form switch provisions
Provides a key points checklist for preparing a compounded RFR-based facilities agreement
Gives an overview of the move away from LIBOR

The Note concentrates on provisions in the LMA Multicurrency Term and Revolving Facilities Agreement that incorporates backward‑looking compounded rates and forward‑looking term rates with rate‑switch provisions (lookback without observation shift). It does not cover recommended form facilities that are built on, or revert to, Term RFRs, including Term SOFR and Term €STR.

For:

Information on employing term RFRs in a loan agreement, see Practice Note: Term risk free rates in loan agreements

...

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Web page updated on 21/05/2026

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