TIDM15GY
RNS Number : 4841R
Kenrick No.3 PLC
08 March 2021
THIS NOTICE CONTAINS IMPORTANT INFORMATION OF INTEREST TO THE
REGISTERED AND BENEFICIAL OWNERS OF THE NOTES (AS DEFINED BELOW).
IF APPLICABLE, ALL DEPOSITARIES, CUSTODIANS AND OTHER
INTERMEDIARIES RECEIVING THIS NOTICE ARE REQUESTED TO PASS THIS
NOTICE TO SUCH BENEFICIAL OWNERS IN A TIMELY MANNER.
UK RETAIL INVESTORS - Manufacturer target market is eligible
counterparties and professional clients only (all distribution
channels) pursuant to Regulation (EU) No 2017/565, Regulation (EU)
No 600/2014 and Regulation (EU) 2017/1129 as they form part of UK
domestic law by virtue of the European Union (Withdrawal) Act 2018
("EUWA"). No key information document (KID) pursuant to Regulation
(EU) No 1286/2014 as it forms part of UK domestic law by virtue of
the EUWA ("UK PRIIPs Regulation") has been prepared as the Notes
referred to in this Notice are not available to retail investors in
the UK.
If you are in any doubt as to the action you should take, you
are recommended to seek your own financial advice immediately from
your stockbroker, bank manager, accountant or other financial
adviser authorised under the Financial Services and Markets Act
2000 (if you are in the United Kingdom), or from another
appropriately authorised independent financial adviser and such
other professional advice from your own professional advisors as
you deem necessary.
This Notice is addressed only to holders of the Notes (as
defined below) and persons to whom it may otherwise be lawful to
distribute it ("relevant persons"). It is directed only at relevant
persons and must not be acted on or relied on by persons who are
not relevant persons. Any investment or investment activity to
which this Notice relates is available only to relevant persons and
will be engaged in only with relevant persons.
If you have recently sold or otherwise transferred your entire
holding(s) of Notes referred to below, you should notify the
Tabulation Agent (as defined below) accordingly.
THIS NOTICE DOES NOT CONSTITUTE OR FORM PART OF, AND SHOULD NOT
BE CONSTRUED AS, AN OFFER FOR SALE, EXCHANGE OR SUBSCRIPTION OF, OR
A SOLICITATION OF ANY OFFER TO BUY, EXCHANGE OR SUBSCRIBE FOR, ANY
SECURITIES OF THE ISSUER OR ANY OTHER ENTITY IN ANY JURISDICTION.
THE NOTICE AND ITS CONTENTS MAY NOT BE FORWARDED OR DISTRIBUTED TO
ANY OTHER PERSON AND MAY NOT BE REPRODUCED IN ANY MANNER
WHATSOEVER. ANY FORWARDING, DISTRIBUTION OR REPRODUCTION OF THIS
DOCUMENT IN WHOLE OR IN PART IS UNAUTHORISED. FAILURE TO COMPLY
WITH THIS DIRECTIVE MAY RESULT IN A VIOLATION OF THE LAWS OF
APPLICABLE JURISDICTIONS.
In accordance with normal practice, none of the Issuer, the
Solicitation Agent (as defined below), the Trustee, the Agents or
their affiliates (or their respective directors, employees,
officers, consultants or agents) expresses any view or opinion
whatsoever as to the Proposed LIBOR Modification, the Proposed
Amendments, the Amended Documents (each as defined below) or the
information set out in this Notice; and neither the Solicitation
Agent nor the Trustee (nor their respective affiliates, directors,
employees, officers, consultants or agents) makes any
representation or recommendation whatsoever as to any action to be
taken or not taken by Noteholders in relation to the Proposed LIBOR
Modification, the Proposed Amendments, the Amended Documents or
this Notice, or any document prepared in connection with any of
them. Accordingly, the Issuer, the Solicitation Agent (and its
affiliates) and the Trustee urge Noteholders who are in doubt as to
the impact of the implementation of the Proposed LIBOR
Modification, the Proposed Amendments, the Amended Documents or
this Notice or any document prepared in connection with any of them
(including any tax or other consequences), to seek their own
independent financial, tax and legal advice. Neither the Issuer,
the Trustee nor the Solicitation Agent (nor their respective
directors, employees, officers, consultants or agents) has made or
will make any assessment of the merits of the Proposed LIBOR
Modification, the Proposed Amendments, the Amended Documents or
this Notice or of the impact of the Proposed LIBOR Modification,
the Proposed Amendments, the Amended Documents or this Notice on
the interests of the Noteholders either as a class or as
individuals.
KENRICK NO.3 PLC
11th Floor, 200 Aldersgate Street
EC1A 4HD London
United Kingdom
(the "Issuer")
NOTICE OF BASE RATE AND SWAP RATE MODIFICATION
to the holders of the following notes of the Issuer presently
outstanding
GBP350,000,000 Class A Mortgage Backed Floating Rate Notes Due
2054
ISIN: XS1725341041
GBP33,100,000 Class B Mortgage Backed Floating Rate Notes Due
2054
ISIN: XS1725342015
(the "Noteholders" and the "Notes", respectively)
THIS NOTICE IS IMPORTANT AND REQUIRES THE IMMEDIATE ATTENTION OF
NOTEHOLDERS.
NOTICE IS HEREBY GIVEN by the Issuer to the Noteholders in
accordance with Condition 22 (Notices) (as defined below) that the
Issuer intends to amend the Notes and make certain other amendments
on 12 April 2021, by amending the documents specified in this
Notice in order to effect the Proposed LIBOR Modification (as
defined below).
1. We refer to the trust deed dated 25 January 2018 between the
Issuer and Citicorp Trustee Company Limited as trustee (the "Trust
Deed"), including the terms and conditions of the Notes set out at
Schedule 3 thereto (the "Conditions"), pursuant to which the Notes
were constituted on the terms and subject to the conditions
contained therein and to the incorporated terms memorandum dated 25
January 2018 between, inter alios, the Issuer and Citicorp Trustee
Company Limited as trustee (the "Incorporated Terms Memorandum").
Capitalised terms used but not defined in this Notice shall have
the meanings given to them in the Incorporated Terms
Memorandum.
2. Pursuant to Condition 17.2(g) (Additional Right of
Modification), the Issuer may make, and the Trustee shall be
obliged to concur in making without any consent or sanction of the
Noteholders, any modifications to the Conditions or any other
Transaction Documents in order to change the Screen Rate (and
making such other related or consequential amendments as are
necessary or advisable in the reasonable judgment of the Issuer to
facilitate such change) provided that such modification is
undertaken due to the circumstances set out in Condition
17.2(g)(i)(A), the LIBOR Replacement Rate is a rate that satisfies
Condition 17.2(g)(i)(B) and the other procedural formalities of
Condition 17.2 (Additional Right of Modification) have been
met.
3. Pursuant to Condition 17.2(h) (Additional Right of
Modification), the Issuer may make, and the Trustee shall be
obliged to concur in making without any consent or sanction of the
Noteholders, any modifications to the Conditions or any other
Transaction Document for the purpose of changing the base rate that
then applies in respect of the Fixed Rate Swap Agreement to an
alternative base rate as is necessary or advisable in the
commercially reasonable judgement of the Issuer (or the Cash
Manager on its behalf) and the Fixed Rate Swap Provider solely as a
consequence of a LIBOR Modification and for the purpose of aligning
the base rate of the Fixed Rate Swap to the base rate of the Class
A Notes following such LIBOR Modification, provided that the other
procedural formalities of Condition 17.2 (Additional Right of
Modification) have been met.
4. The Issuer intends to amend and restate the Incorporated
Terms Memorandum, the Trust Deed, the Mortgage Administration
Agreement, the front swap confirmation relating to the Fixed Rate
Swap Agreement and the Account Bank Agreement (the "Amended
Documents") as prescribed below to:
(a) remove references to "LIBOR";
(b) change the reference rate to refer to a "SONIA" based rate;
(c) change the interest rate calculation provisions to refer to a "SONIA" based rate,
(d) reprice the Relevant Margin on the Notes to reflect the move
from a LIBOR reference rate to a SONIA reference rate;
(e) align the base rate of the Fixed Rate Swap to the updated
reference rate for the Class A Notes; and
(f) certain other changes necessary or advisable to facilitate
the changes in (a) to (e) above,
(the "Proposed LIBOR Modification").
The Amended Documents in blackline format can be viewed at the
following link
https://www.westbrom.co.uk/about-us/financial-information/securitisation-transactions,
with the changes set out therein being the "Proposed
Amendments".
5. Condition 17.1 (Modification) requires that, in relation to
any proposed modification (including pursuant to Condition 17.2(h)
(Additional Right of Modification)), the Issuer provides
certification to the Trustee that (i) the Fixed Rate Swap Provider
has been notified of such proposed modification and (ii) either the
Fixed Rate Swap Provider has given its prior written consent to
such modification or the prior written consent of the Fixed Rate
Swap Provider is not required for such modification. The Fixed Rate
Swap Provider is a party to the Fixed Rate Swap Agreement and so
its prior written consent is required to the amendments to the
Fixed Rate Swap Agreement in connection with the Proposed LIBOR
Modification. As the Proposed LIBOR Modification is being
implemented following the end of the Brexit transition period, the
Fixed Rate Swap Provider is required, from a regulatory
perspective, to incorporate provisions within the Fixed Rate Swap
Agreement regarding the mandatory regulatory requirements which the
Fixed Rate Swap Provider is required to adhere to under the EU bank
recovery and resolution directive and US QFC Stay Rules. Therefore,
such provisions are included in the scope of the Proposed
Amendments to be made to the Fixed Rate Swap Agreement pursuant to
Condition 17.2(h)(Additional Right of Modification).
6. The Proposed LIBOR Modification is being undertaken due to:
(a) a public statement by the Financial Conduct Authority of the
UK (the "FCA") as supervisor of the administrator of LIBOR that
LIBOR will be permanently or indefinitely discontinued; and
(b) a public statement by the FCA as supervisor of the
administrator of LIBOR that LIBOR might no longer be used and that
its usage might be subject to restrictions or adverse
consequences.
7. The FCA has confirmed that that it will no longer persuade or
compel banks to submit rates for the calculation of the LIBOR
benchmark after the end of 2021 and expects some panel banks will
cease contributing to LIBOR at such time. In addition, the Bank of
England and the FCA have announced that they have mandated a
working group to promote a broad-based transition to SONIA across
sterling bond, loan and derivative markets, so that SONIA is
established as the primary sterling interest rate benchmark by the
end of 2021. The continuation of LIBOR on the current basis cannot
and will not be guaranteed after 2021 and regulators have urged
market participants to take active steps to implement the
transition to SONIA and other risk-free rates ahead of the end of
2021. In this regard we refer to the following items which are
available from the website of the FCA at www.fca.org.uk:
(a) the statement of the FCA entitled "Next steps for LIBOR
transition in 2020: the time to act is now" dated 16 January
2020;
(b) the speech of Edwin Schooling Latter, Director Markets and
Wholesale Policy at the FCA, on 14 July 2020 entitled "LIBOR
transition - the critical tasks ahead of us in the second half of
2020"; and
(c) the statement of the FCA entitled "FCA announcement on future cessation and loss of representativeness of the LIBOR benchmarks" dated 5 March 2021.
8. In connection with the Proposed LIBOR Modification, prior to
the first Interest Payment Date on which such modification is
effective, an adjustment to the Relevant Margin on the Notes will
be calculated to reflect the spread differential between LIBOR and
SONIA by reference to such rates on a specified date. The intended
method of calculation and intended date of calculation is set out
in Appendix 1 (Pricing Steps Paper) hereto (the "Pricing Steps
Paper").
9. Pursuant to Condition 17.2 (Additional Right of Modification)
the Trustee is required to concur with the Issuer in making the
Proposed LIBOR Modification if:
(a) the Trustee has not been contacted by Noteholders
representing at least 10 per cent. of the aggregate Principal
Amount Outstanding of the most senior Class of Notes (being the
Class A Notes) within 30 calendar days of the date of this Notice
notifying the Trustee that such Noteholders do not consent to the
Proposed LIBOR Modification; and
(b) all other conditions set out in Condition 17.2 (Additional
Right of Modification) have been satisfied.
10. The Rating Agencies have been informed of the Proposed LIBOR
Modification by the Issuer and, as at the date of this Notice, none
of the Rating Agencies has indicated that such modification would
result in (a) a downgrade, withdrawal or suspension of the then
current ratings assigned to any Class of the Notes by such Rating
Agency or (b) such Rating Agency placing any Notes on rating watch
negative (or equivalent).
11. Copies of the Trust Deed, drafts of the Amended Documents
and related documents may be inspected in electronic form.
12. Class A Noteholders who wish to notify the Trustee that they
do not consent to the Proposed LIBOR Modification must do so by 4
p.m. (London time) on 8 April 2021 (the "Deadline"). No physical or
virtual meetings of Noteholders will be held.
13. NO ACTION IS REQUIRED TO BE TAKEN BY ANY CLASS A NOTEHOLDER
WHO DOES NOT WISH TO REJECT THE PROPOSED LIBOR MODIFICATION.
14. Each Class A Noteholder that wishes to vote to reject the
Proposed LIBOR Modification must ensure that:
(a) it gives electronic voting instructions to the relevant
clearing system (in accordance with that clearing system's
procedures):
(i) TO REJECT the Proposed LIBOR Modification; and
(ii) specifying the full name of the direct participant
submitting the voting instruction and the account number(s) for the
party making the voting submission(s),
such that the Tabulation Agent will receive that Noteholder's
voting instructions on or before the Deadline; and
(b) the relevant clearing system has received irrevocable
instructions (with which they have complied) to block the Class A
Notes held by such holder in the securities account to which they
are credited with effect from and including the day on which the
electronic voting instruction is delivered to the relevant clearing
system so that no transfers may be effected in relation to the
Notes held by such holder at any time after such date until the
Deadline. Votes will only apply to the Principal Amount Outstanding
of Notes blocked in the relevant clearing system.
Class A Notes should be blocked in accordance with the
procedures of the relevant clearing system and the deadlines
required by the relevant clearing system. Class A Noteholders
should note that clearing system deadlines for submission of
electronic voting instructions may be different to the Deadline set
out herein, and as such Noteholders who wish to reject the Proposed
LIBOR Modification should check the relevant clearing system's
procedures and deadlines ahead of the Deadline.
15. Any beneficial owner of Class A Notes who is not a direct
participant in the clearing systems must contact its broker,
dealer, bank, custodian, trust company or other nominee to arrange
for the accountholder in Euroclear or Clearstream, Luxembourg, as
the case may be, through which it holds Class A Notes to deliver an
electronic voting instruction in accordance with the requirements
of the relevant clearing system and procure that the Notes are
blocked in accordance with the normal procedures of the relevant
clearing system and the deadlines imposed by such clearing
system.
16. Each Class A Noteholder that wishes to reject the Proposed
LIBOR Modification should ensure that the relevant blocking
instructions to the relevant clearing system can be allocated to
the relevant electronic voting instruction. For the avoidance of
doubt, each electronic voting instruction must have an individual
matching blocking instruction.
17. By providing electronic voting instructions as described
above, each beneficial owner of the Notes authorises the clearing
systems at which their account is maintained to disclose to the
Tabulation Agent, the Solicitation Agent, the Principal Paying
Agent, the Trustee and the Issuer confirmation that they are the
beneficial owner of such Notes and the Principal Amount Outstanding
of such Notes.
18. Following expiry of the Deadline, the Tabulation Agent will
calculate the number of rejection instructions received and notify
each of the Issuer, the Solicitation Agent and the Trustee. If
"Reject" votes are received from Class A Noteholders representing
at least 10 per cent. of the aggregate Principal Amount Outstanding
of the most senior Class of Notes then outstanding by the Deadline,
the Issuer will not be entitled to enter into the Proposed LIBOR
Modification unless an Extraordinary Resolution of the Noteholders
of the most senior Class of Notes then outstanding is subsequently
passed approving the Proposed LIBOR Modification. If the 10 per
cent. threshold is not reached and the other requirements of
Condition 17.2(g) and (h) are satisfied, the Issuer and the Cash
Manager will certify to the Trustee in writing that the
requirements of Condition 17.2(g) have been met (the "LIBOR
Modification Certificate") and that the requirements of Condition
17.2(h) have been met (the "Swap Modification Certificate", and
together with the LIBOR Modification Certificate, the "Modification
Certificates") and the Trustee (in reliance solely on the
Modification Certificates), the Issuer and the other parties to the
Amended Documents will then enter into the Amended Documents on the
Interest Payment Date falling on 12 April 2021 to effect the
Proposed Amendments. The Noteholders will be bound by such Proposed
Amendments.
19. Pursuant to Condition 17.2 (Additional Right of
Modification), when implementing any modification pursuant to
Condition 17.2 (Additional Right of Modification) (save to the
extent that the Trustee considers that the proposed modification
would constitute a Reserved Matter), the Trustee shall not consider
the interests of the Noteholders, any other Secured Creditor or any
other person and shall act and rely solely and without further
investigation on any certificate (including any Modification
Certificate) or evidence provided to it by the Issuer or the
relevant Transaction Party, as the case may be, pursuant to
Condition 17.2 (Additional Right of Modification) and shall not be
liable to the Noteholders, any other Secured Creditor or any other
person for so acting or relying, irrespective of whether any such
modification is or may be materially prejudicial to the interests
of any such person.
20. Each person receiving this Notice is deemed to acknowledge
that such person has not relied on the Issuer, the Trustee, the
Solicitation Agent, the Tabulation Agent, the Principal Paying
Agent or any other party to the Transaction Documents in connection
with its decision on how to vote in relation to the Proposed LIBOR
Modification. Each such person must make its own analysis and
investigation regarding the Proposed LIBOR Modification, the
Proposed Amendments and the Amended Documents and make its own
voting decision, with particular reference to its own investment
objectives and experience, and any other factors which may be
relevant to it in connection with such voting decision. If such
person is in any doubt about any aspect of the Proposed LIBOR
Modification, the Proposed Amendments and the Amended Documents
and/or the action it should take, it should consult its
professional advisers. Each such person should also carefully
consider the risk factors set out in Appendix 2 (Risk Factors) to
this Notice prior to making a voting decision.
21. Additional notifications will be made to Noteholders in
accordance with Condition 22 (Notices) as soon as reasonably
practicable following:
(a) the Deadline, notifying Noteholders of the voting results;
(b) the Pricing Date (as defined in the Pricing Steps Paper),
notifying Noteholders of the Adjusted Margins, the Class A Adjusted
Step-Up Margin, the LIBOR vs SONIA Interpolated Basis, the Forward
Adjustment Spread and the Class A Step-Up Margin Adjustment (each
as defined in the Pricing Steps Paper); and
(c) the entry into of the Amended Documents.
22. Questions and requests for assistance in connection with (i)
the Notice may be directed to the Solicitation Agent and (ii) the
delivery of electronic voting instructions for the Class A Notes
may be directed to the Tabulation Agent, the contact details for
which are on the last page of this Notice.
23. None of the Trustee, the Solicitation Agent, the Tabulation
Agent or the Agents (or their respective affiliates, directors,
employees, officers, consultants or agents) makes any
representation that all relevant information has been disclosed to
Noteholders in or pursuant to this Notice or otherwise. Noteholders
should take their own independent legal, financial, tax or other
advice on the merits and the consequences of voting to reject the
Proposed LIBOR Modification, including any tax consequences, and on
the impact of the implementation of the Proposed LIBOR
Modification. None of the Trustee, the Solicitation Agent, the
Tabulation Agent or the Agents (or their respective affiliates,
directors, employees, officers, consultants or agents) is
responsible for the accuracy, completeness, validity or correctness
of the statements made in this Notice or omissions therefrom.
24. The delivery of this Notice shall not, under any
circumstances, create any implication that the information
contained in this Notice is correct as of any time subsequent to
the date hereof or that there has been no change in the information
set forth in this Notice or in the affairs of the Issuer or that
the information in this Notice has remained accurate and complete.
None of the Solicitation Agent, the Tabulation Agent, the Trustee
or the Agents (or their respective affiliates, directors,
employees, officers, consultants or agents) accepts any
responsibility for the information contained in this Notice.
25. None of the Trustee, the Solicitation Agent, the Tabulation
Agent or the Agents (or their respective affiliates, directors,
employees, officers, consultants or agents) or any other party to
the Amended Documents or any other person, except the Issuer, has
independently verified, or assumes any responsibility for, the
accuracy of the information and statements contained in this
Notice.
26. No person has been authorised to make any recommendation on
behalf of the Issuer, the Trustee, the Solicitation Agent, the
Tabulation Agent or the Agents (or their respective affiliates,
directors, employees, officers, consultants or agents) as to
whether or how a Noteholder should reject the Proposed LIBOR
Modification. No person has been authorised to give any
information, or to make any representation in connection therewith,
other than those contained herein. If made or given, such
recommendation or any such information or representation must not
be relied upon as having been authorised by the Issuer, the
Trustee, the Solicitation Agent, the Tabulation Agent or the Agents
(or their respective affiliates, directors, employees, officers,
consultants or agents).
27. This Notice is issued and directed only to the Noteholders
and no other person shall, or is entitled to, rely or act on, or be
able to rely or act on, its contents, and it should not be relied
upon by any Noteholder for any purpose other than the Proposed
LIBOR Modification. For the avoidance of doubt, any Notes held by
or on behalf of or for the benefit of the Issuer or any other
Relevant Person shall be deemed not to remain outstanding.
28. The Issuer and the Solicitation Agent are entitled to have
or hold positions in the Notes either for their own account or for
the account, directly or indirectly, of third parties and may make
or continue to make a market in, or subject to the provisions of
the Trust Deed, vote in respect of, or act as principal in any
transactions in, or relating to, or otherwise act in relation to,
the Notes and may or may not, subject to the provisions of the
Trust Deed, submit or deliver valid instructions in respect of the
Notes. The Issuer and the Solicitation Agent are entitled to
continue to hold or dispose of, in any manner it may elect, the
Notes that it may hold as at the date of this Notice or, from such
date, to acquire further Notes, subject to applicable law and may
or may not, subject to the provisions of the Trust Deed, submit or
deliver valid instructions in respect of such Notes. For the
avoidance of doubt, any Notes held by or on behalf of or for the
benefit of the Issuer shall be deemed not to be outstanding. No
such submission or non-submission by the Solicitation Agent or the
Issuer should be taken by any Noteholder or any other person as any
recommendation or otherwise by any of the Issuer, the Solicitation
Agent, as the case may be, or any other person as to the merits of
rejecting or not rejecting the Proposed LIBOR Modification.
29. Noteholders with queries concerning the content of this
Notice are kindly requested to contact the Issuer, Lloyds Bank
Corporate Markets plc in its capacity as the solicitation agent
(the "Solicitation Agent") or Citibank, N.A., London Branch as
tabulation agent (the "Tabulation Agent") using the details set out
below.
Contact Details:
Issuer: Kenrick No.3 Plc
c/o Maples Fiduciary Services (UK) Limited
11th Floor, 200 Aldersgate Street
London EC1A 4HD
United Kingdom
Tel: +44 (0)20 7466 1600
Attention: The Directors
Email: london_structured@maples.com
Solicitation Agent: Lloyds Bank Corporate Markets plc
10 Gresham Street
London EC2V 7AE
United Kingdom
Tel: +44 (0)20 7158 1726/1719
Attention: Liability Management Team
Email: liability.management@lloydsbanking.com
Tabulation Agent: Citibank N.A., London Branch
Citigroup Centre Canada Square
London E14 5LB
United Kingdom
Tel: +44 (0)20 7508 3867
Attention: Exchange Team
Email: exchange.gats@citi.com
This Notice is given by
KENRICK NO.3 PLC
as Issuer
Dated 8 March 2021
APPIX 1
PRICING STEPS PAPER
1. The Proposal
Conversion of the Note Rate (as defined in paragraph 3 below)
for the GBP350,000,000 Class A Mortgage Backed Floating Rate Notes
due October 2054 (ISIN: XS1725341041) (the "Class A Notes") and the
GBP33,100,000 Class B Mortgage Backed Floating Rate Notes due
October 2054 (ISIN: XS1725342015) (the "Class B Notes" and,
together with the Class A Notes, the "Notes") issued by Kenrick
No.3 Plc from LIBOR to SONIA, with a consequential adjustment to
the Relevant Margin (as defined below) of each Class of Notes and
the Step-Up Margin of the Class A Notes. Together, the Relevant
Margin and the Step-Up Margin shall be collectively referred to
herein as the "Applicable Margins".
2. Rationale for the Proposal
Due to the differences in the nature of LIBOR and SONIA, the
replacement of LIBOR as the reference rate for the Notes will also
require corresponding adjustments to the Applicable Margins payable
in respect of the Notes. The pricing methodology proposed for the
amendment of the Applicable Margins for the Notes on conversion of
the reference rate from LIBOR to SONIA uses only market observable
screen spot rates.
The date from which the proposed change in reference rate is to
occur will be the Interest Payment Date falling in April 2021,
being 12 April 2021 (the "Effective Date").
The determination of the relevant market observable screen spot
rates will take place at or around 2 p.m. London time (the "Pricing
Time") on 9 April 2021 (the "Pricing Date"). This is to ensure that
the Pricing Date is as close as possible to the Effective Date
whilst allowing sufficient time for the necessary changes to be
implemented following the determination of the Adjusted Margins and
the Class A Adjusted Step-Up Margin (each as defined below).
To reflect the time between the Pricing Date and the Effective
Date, a Forward Adjustment Spread to be determined by the
Solicitation Agent at its sole discretion will be applied to the
Adjusted Margins, as detailed below. The Forward Adjustment Spread
will be determined at or around the Pricing Time on the Pricing
Date and announced in conjunction with the publication of the LIBOR
vs SONIA Interpolated Basis.[1]
For the avoidance of doubt, the reference rate applicable to the
Notes up to but excluding the Effective Date will continue to be 3
month GBP LIBOR and the interest payment made on the Effective Date
will not be affected by the pricing methodology described
herein.
3. The Adjusted Margins
The relevant "Note Rate" for each of the Notes effective on the
Effective Date will be equal to Compounded Daily SONIA plus the
Relevant Margin as adjusted as follows (each such adjusted Relevant
Margin, an "Adjusted Margin"):
the sum of:
A. the Relevant Margin; plus
B. the LIBOR vs SONIA Interpolated Basis; plus
C. the Forward Adjustment Spread,
where:
Relevant Margin means:
(a) in respect of the Class A Notes, 0.37 per cent. per annum;
(b) in respect of the Class B Notes, 0.00 per cent. per annum.
"LIBOR vs SONIA Interpolated Basis" is a number of basis points
rounded to the nearest 0.1 basis points (with 0.05 basis points
rounded upwards) as calculated by the Solicitation Agent at or
around the Pricing Time on the Pricing Date, as follows:
On the Pricing Date, the Solicitation Agent will determine:
(a) the 1 Year LIBOR vs SONIA Basis (as quoted on the Bloomberg
page ICAB21 at or around the Pricing Time, or such other page as
may replace it on that information service, or on such similar or
replacement service as may be determined by the Solicitation
Agent); and
(b) the 2 Year LIBOR vs SONIA Basis (as quoted on the Bloomberg
page ICAB21 at or around the Pricing Time or such other page as may
replace it on that information service, or on such similar or
replacement service as may be determined by the Solicitation
Agent).
Thereafter the Solicitation Agent will calculate the linear
interpolation for the applicable LIBOR vs SONIA Interpolated Basis
to the Weighted Average Life of the Class A Notes (the "LIBOR vs
SONIA Interpolated Basis") by:
(i) subtracting (a) above from (b) above and multiplying the
result of such subtraction by the Maturity Weight; and
(ii) adding (a) to the result calculated in accordance with sub-paragraph (i).
If the rate determined for the LIBOR vs SONIA Interpolated Basis
is negative then the LIBOR vs SONIA Interpolated Basis shall be
deemed to be 0.00 basis points.
"Forward Adjustment Spread" is a number of basis points rounded
to the nearest 0.1 basis points (with 0.05 basis points rounded
upwards) as calculated by the Solicitation Agent at its sole
discretion in accordance with market practice reflecting the time
period from the Pricing Date to the Effective Date, and will be
determined at or around the Pricing Time on the Pricing Date.
For the purposes of these calculations:
"Maturity Weight" means the amount, expressed as a percentage,
calculated as the Weighted Average Life (expressed in years) of the
Class A Notes minus 1.
"Weighted Average Life" means the Weighted Average Life of the
Class A Notes as at the Pricing Date, rounded to two decimal
places.
Assumptions used in calculating the Weighted Average Life
In determining a Weighted Average Life of 1.48 years via the CFT
function of the KENRICK 3 A Mtge Bloomberg page, the following
assumptions have been used:
(a) the Pricing Date is 9 April 2021;
(b) the Issuer exercises its option to redeem the Notes on the Step-Up Date;
(c) the Loans are subject to a constant prepayment rate ("CPR")
(in addition to scheduled principal redemptions) of 10 per
cent.;
(d) no Loan is delinquent or in default;
(e) no Loan is on payment holiday;
(f) the Current Balance of Notes is as at the Interest Payment
Date falling on 11 January 2021; and
(g) the Current Balance of all Loans in the portfolio is as at 31 December 2020.
All other assumptions remain in line with those outlined in the
section headed "Weighted Average Lives of the Notes" of the
prospectus dated 23 January 2018 published by the Issuer in
relation to the Notes.
4. The Class A Adjusted Step-Up Margin
The Note Rate payable on the Class A Notes from (and including
the Interest Payment Date falling in January 2023 (the "Step-Up
Date")) will be equal to Compounded Daily SONIA plus the Step-Up
Margin (as defined below) as adjusted as set out below (the "Class
A Adjusted Step-Up Margin"). No step-up margin is applicable in
respect of the Class B Notes and the Relevant Margin will continue
to apply in respect of the Class B Notes.
The Step-Up Margin for the Class A Notes will be adjusted as
follows:
(a) the Step-Up Margin; plus
(b) Class A Step-Up Margin Adjustment,
where:
(i) "Step-Up Margin" means 0.74 per cent. per annum; and
(ii) "Class A Step-Up Margin Adjustment" means the 3 month tenor
spread adjustment between GBP LIBOR and SONIA, as specified in the
column entitled "Spread Adjustments" of the Basis Screen Page (as
defined below) in respect of the 5 year median difference between 3
month LIBOR and realised SONIA fixings within the same 3 month
period, as calculated by Bloomberg Index Services Limited (or a
successor provider as approved and/or appointed by ISDA from time
to time) and rounded to the nearest 0.1 basis points (with 0.05
basis points rounded upwards).
The "Basis Screen Page" is the Bloomberg page GDCO 9003 6 1, or
any successor page.
For the avoidance of doubt:
(A) Following (i) the FCA announcement[2] on 5(th) March 2021
regarding the future cessation and loss of representativeness of
the LIBOR benchmarks, (ii) the subsequent statement by ISDA[3] on
5(th) March 2021 that the FCA's announcement constitutes an index
cessation event under the IBOR Fallbacks Supplement and the ISDA
2020 IBOR Fallbacks Protocol and (iii) the announcement by
Bloomberg Index Services Limited[4] on 5(th) March 2021 of a Spread
Adjustment Fixing Date for all LIBOR tenors and currencies, the
Class A Step-Up Margin Adjustment is expected to be 11.9 basis
points (being 0.1193 per cent. rounded to the nearest 0.1 basis
points with 0.05 basis points rounded upwards). Bloomberg Index
Services Limited reserves the right to adjust spread adjustments
fixed at the Spread Adjustment Fixing Date for errors and so the 3
month tenor spread adjustment between GBP LIBOR and SONIA to be
used for the purposes of the Class A Step-Up Margin Adjustment will
be the rate appearing on the Basis Screen Page as at the Pricing
Time on the Pricing Date;
(B) the 3 month tenor spread adjustment between GBP LIBOR and
SONIA can also be found (I) on the Bloomberg screen "SBP0003M
Index"; and (II) from the Bloomberg page "FBAK" by selecting
"Official Spread Adjustments between the Adjusted Reference Rates
and IBOR Rates" then "GBP LIBOR" as the applicable IBOR
("Alternative Sources"); and
(C) in the event that the Class A Step-Up Margin Adjustment
cannot be obtained from either the Basis Screen Page or the
Alternative Sources, the Class A Step-Up Margin Adjustment will be
11.9 basis points (being 0.1193 per cent. rounded to the nearest
0.1 basis points with 0.05 basis points rounded upwards as per the
announcement of a Spread Adjustment Fixing Date by Bloomberg Index
Services Limited on 5(th) March 2021).[5]
The method of calculation specified in the Class A Step-Up
Margin Adjustment above accords with the methodology for such
adjustments contained in ISDA IBORs Fallback Supplement found at
http://assets.isda.org/media/3062e7b4/23aa1658-pdf.
The Adjusted Margins, the Class A Adjusted Step-Up Margin, the
LIBOR vs SONIA Interpolated Basis, the Forward Adjustment Spread
and the Class A Step-Up Margin Adjustment will be announced to
Noteholders in accordance with Condition 22 (Notice to Noteholders)
as soon as practicable following the Pricing Time on the Pricing
Date.
The detailed provisions relating to the calculation of
Compounded Daily SONIA are set out in the Amended Documents
available at the following link
https://www.westbrom.co.uk/about-us/financial-information/securitisation-transactions.
APPIX 2
RISK FACTORS
Responsibility for complying with the procedures for submitting
instructions in connection with the Proposed LIBOR Modification
Noteholders are solely responsible for complying with all of the
procedures for submitting instructions. None of the Issuer, the
Solicitation Agent, the Principal Paying Agent, the Trustee or the
Tabulation Agent assumes any responsibility for informing
Noteholders of irregularities with respect to instructions.
No assurance that the Proposed LIBOR Modification will be
implemented
Until the Proposed LIBOR Modification is approved by way of
negative consent of the Class A Noteholders, the Amended Documents
are executed and all requirements of Condition 17.2 (Additional
Right of Modification of Transaction Documents) are met, no
assurance can be given that the Proposed LIBOR Modification will be
implemented in respect of the Notes.
The market continues to develop in relation to risk free rates
(including overnight rates) as reference rates for the Notes
If the Proposed LIBOR Modification is approved by way of
negative consent of the Class A Noteholders and implemented, from
and including the date of implementation, the Note Rate for the
Notes will be determined on the basis of Compounded Daily SONIA (as
set out in the Amended Documents). Compounded Daily SONIA differs
from LIBOR in a number of material respects, including (without
limitation) that Compounded Daily SONIA is a backwards-looking,
compounded, risk-free overnight rate, whereas LIBOR is expressed on
the basis of a forward-looking term and includes a risk-element
based on inter-bank lending. As such, Class A Noteholders and Class
B Noteholders should be aware that LIBOR and SONIA may behave
materially differently as interest reference rates for the Notes.
The use of Compounded Daily SONIA as a reference rate for Eurobonds
is relatively recent, and is subject to change and development,
both in terms of the substance of the calculation and in the
development and adoption of market infrastructure for the issuance
and trading of bonds referencing Compounded Daily SONIA.
Accordingly, Noteholders should be aware that the market
continues to develop in relation to SONIA as a reference rate in
the capital markets and its adoption as an alternative to sterling
LIBOR. The market or a significant part thereof may adopt an
application of SONIA that differs significantly from that set out
in the Conditions and used in relation to the Notes that reference
a SONIA rate. Interest on Notes which reference a SONIA rate is
only capable of being determined at the end of the relevant
observation period and immediately prior to the relevant Interest
Payment Date.
It may be difficult for Class A Noteholders and Class B
Noteholders to estimate reliably the amount of interest which will
be payable on the Notes, and certain investors may be unable or
unwilling to trade such Notes without changes to their IT systems,
both of which factors could adversely impact the liquidity of such
Notes. Further, if the Notes become due and payable under
Conditions 9 (Final Redemption, Mandatory Redemption in part,
Optional Redemption, Purchase and Cancellation) or 13 (Events of
Default), the Note Rate payable shall be determined on the date the
Notes became due and payable and shall not be reset thereafter.
Investors should carefully consider how any mismatch between the
adoption of SONIA in the bond, loan and derivatives markets may
impact any hedging or other financial arrangements which they may
put in place in connection with any acquisition, holding or
disposal of any Notes.
[1] Based on market data as at 8 March 2021, the indicative
Forward Adjustment Spread was less than 0.1bps and no adjustment
would have been made.
[2]
https://www.fca.org.uk/publication/documents/future-cessation-loss-representativeness-libor-benchmarks.pdf
[3]
https://www.isda.org/2021/03/05/isda-statement-on-uk-fca-libor-announcement
[4]
https://assets.bbhub.io/professional/sites/10/IBOR-Fallbacks-LIBOR-Cessation_Announcement_20210305.pdf
[5]
https://assets.bbhub.io/professional/sites/10/IBOR-Fallbacks-LIBOR-Cessation_Announcement_20210305.pdf
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END
BRCDKFBKKBKDANK
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