Trowers & Hamlins has advised Coastline Housing on its first SONIA based loan facility from Lloyds, which the law firm said was believed to be the first day one SONIA (Sterling Overnight Index Average) facility in the social housing sector.
Coastline, the South West based housing association, has signed up to a revolving credit facility of £30m for five years with a potential extension out to seven years from Lloyds with a variable interest rate and standard financial covenants.
Trowers said: “This facility differs significantly in terms of the benchmark for that variable interest rate as Coastline is the one of the first RPs to test the new SONIA based interest rate product developed in response to the withdrawal of LIBOR and now offered by Lloyds to the market.”
Since the 1980s LIBOR has been the principal choice of variable rate for UK lenders. This departure from LIBOR is being actively encouraged by the Financial Conduct Authority and the Bank of England as LIBOR will cease to be the key interest-rate benchmark for sterling by the end of 2021 and no new LIBOR products will be offered to the market after the end of March 2021.
Nathan Mallows, Director of Finance at Coastline, said: "The new facilities for Coastline provided two elements of the finance strategy at this time providing a new lender to support our commitment to ending the affordable housing crisis in Cornwall and secondly to keep ahead of developments in LIBOR transition. We are pleased that the effective working relationship with Trowers has enabled us to be leading the charge for RPs in agreeing SONIA loans."
Jasna Djurisic from the Trowers Banking and Finance team said: "We are delighted to have worked with Coastline on this groundbreaking loan which builds on the team's advice in the sector on SONIA loans. The agreement follows to a large extent the LMA's current draft exposure agreement, which although not in final recommended form, does offer transparent and objective drafting. The rate is initially based on the SONIA compounded reference rate but will track the Bank of England's published SONIA Compounded Index, when available, which is currently anticipated from August 2020."