TIDMAS13
RNS Number : 1905I
Equity Release Funding (No. 2) plc
10 August 2021
THIS NOTICE IS IMPORTANT AND REQUIRES THE IMMEDIATE ATTENTION OF
NOTEHOLDERS. IF ANY NOTEHOLDER IS IN ANY DOUBT AS TO THE ACTION IT
SHOULD TAKE OR IS UNSURE OF THE IMPACT OF THE IMPLEMENTATION OF ANY
EXTRAORDINARY RESOLUTION TO BE PROPOSED AT A MEETING, IT SHOULD
SEEK ITS OWN FINANCIAL AND LEGAL ADVICE, INCLUDING AS TO ANY TAX
CONSEQUENCES, IMMEDIATELY FROM ITS STOCKBROKER, BANK MANAGER,
SOLICITOR, ACCOUNTANT OR OTHER INDEPENDENT FINANCIAL OR LEGAL
ADVISER.
EQUITY RELEASE FUNDING (NO.2) PLC
(incorporated in England and Wales with limited liability under
registered number 04414548)
(the "Issuer")
NOTICE
to the holders of the following outstanding notes
GBP255,000,000 5.88 per cent. Class A2 Mortgage Backed Notes due
2032 (the "Notes")
(ISIN: XS0147706237 Common Code: 014770623)
Capitalised terms used but not otherwise defined herein shall
have the meanings ascribed to them in terms and conditions of the
Notes (the "Conditions") and the master definitions and
construction schedule dated 11 June 2002 and as amended on 21
December 2005 (the "Master Definitions and Construction Schedule")
and the Amendment Deed (as defined below).
Background
On 5 March 2021 (the "LIBOR Announcement Date"), the UK
Financial Conduct Authority (the "FCA") confirmed that all Sterling
LIBOR settings will either cease to be provided by any
administrator or no longer be representative of their underlying
market immediately after 31 December 2021 (the "LIBOR
Announcement"). The FCA has also made a number of previous
announcements regarding the proposed cessation of LIBOR. In
relation to 3-month Sterling LIBOR in particular, the LIBOR
Announcement provided that immediately after 31 December 2021, such
LIBOR setting would no longer be representative of the underlying
market and economic reality and that such representativeness will
not be restored. For additional background to the LIBOR
Announcement, we refer to:
(a) the speech of Andrew Bailey, the Chief Executive of the FCA,
on 27 July 2017 entitled "The Future of LIBOR";
(b) the statement of the FCA entitled "FCA Statement on LIBOR
panels" dated 24 November 2017;
(c) the speech of Andrew Bailey, the Chief Executive of the FCA,
on 12 July 2017 entitled "Interest rate benchmark reform -
transition to a world without LIBOR";
(d) the "Dear CEO Letter" sent by the FCA and the Prudential
Regulation Authority to major banks and insurers and published on
the FCA website, dated 19 September 2018, relating to the need to
transition from LIBOR to alternative benchmarks;
(e) the speech of Andrew Bailey, the Chief Executive of the FCA,
on 15 July 2019 entitled "The Future of LIBOR"; and
(f) the statement of the FCA entitled "Transition from LIBOR" dated 4 September 2019.
(a) to (f) of the above is available from the website of the FCA
at www.fca.org.uk.
In 2017, the Bank of England (the "BoE") and the FCA announced
that they had mandated a working group (the "Working Group") to
implement a broad-based transition to the Sterling Overnight Index
Average ("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. Therefore, Sterling
LIBOR will not continue on the current basis 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 this deadline.
While a fixed interest rate applies to the Notes, the Guaranteed
Investment Contract and the Liquidity Facility Agreement (the
"Original Transaction Documents") include references to Sterling
LIBOR. As such, the Issuer has considered the above regulatory
guidance for parties to replace Sterling LIBOR in a timely manner
prior to the end of 2021, the uncertainty around the continued
availability of Sterling LIBOR for the Original Transaction
Documents and the potential for unintended results following the
operation of the Sterling LIBOR fallbacks in such Original
Transaction Documents.
In light of the above, the Issuer confirmed to Citigroup Trustee
Company Limited ("the Trustee") that it was in the interests of the
Noteholders for the Trustee to consent to certain amendments to the
Original Transaction Documents to be effected by the entry into an
amendment deed (the "Amendment Deed" and the amendments as further
described in the Amendment Deed, the "Amendments"). In respect of
the Guaranteed Investment Contract, references to Sterling LIBOR
will be replaced with the Bank of England's Base Rate in the
interim and thereafter with SONIA. In respect of the Liquidity
Facility Agreement, references to Sterling LIBOR will be replaced
with SONIA. The interest rate benchmarks applicable to the Notes
will not be amended as part of the Amendments.
Due to the differences in the nature of LIBOR and SONIA, the
replacement of LIBOR as the reference rate for the Original
Transaction Documents requires a corresponding credit adjustment
spread to the existing Relevant Margin payable on the Original
Transaction Documents. Under the Amendments, the credit adjustment
spread in respect of the Liquidity Facility Agreement is determined
on a LIBOR vs SONIA interpolated basis, which applies a "weighted
average life" methodology and the rates published by Bloomberg
Index Services Limited on the LIBOR Announcement Date and as
referenced on Bloomberg page ICAP > SONIA Basis. Using this
methodology, the applicable credit adjustment spread is 0.1110 per
cent.
The Issuer has informed the Rating Agencies of the Amendments.
Given that no Rating Agency has indicated that the proposed
Amendments would have an adverse effect on the current ratings of
the Notes, the Issuer was satisfied that the amendments to the
Original Transaction Documents were not materially prejudicial to
the interest of the Noteholders.
In light of the above, an amendment deed dated 10 August 2021
(the "Amendment Deed") was entered into between, among others, the
Issuer and the Trustee in order to effect the Amendments. Such
Amendment Deed is available for inspection at the registered office
of the Issuer during normal business hours.
This Notice is given by the Issuer.
Dated: 10 August 2021
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END
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