Bat Facility Agreement

This is the world`s first multi-currency credit contract, which includes both “SONIA” and the overnight secured financing rate (“SOFR”), the standard benchmark rates that are emerging to replace LIBOR for sterling money and dollar loans. In addition, the short-term interest rate in euros (“STR”) is set as the benchmark rate for Euro-swing loans, which will replace EONIA as a day-to-day exchange rate. British American Tobacco p.l.c . (BAT) is pleased to announce that it has signed a new $6 billion revolving credit facility. The new facility will replace BAT`s existing $6 billion revolving credit facility and will be provided by a consortium of 21 banks. The new facility consists of a $364 billion facility and a five-year facility of $3 billion, primarily used for cash purposes. Barclays and HSBC coordinated the 21 banking facilities. The Tesco Facility Agreement is the first syndic facility agreement to be referred to both SONIA and SOFR from the signing date. The two previous RFR agreements on union facilities for Royal Dutch Shell plc and British American Tobacco each referred to LIBOR on the date of signing and contained a mechanism for joining the RFR for the duration of the facility agreement.

Tesco`s facility facility agreement is also the world`s first syndic RFR facility agreement, which provides for a selection of interest periods. Other key features of Tesco`s facility facility agreement, which is publicly available, are: in anticipation of the London Interbank Offered Rate (LIBOR) shutdown, it is the world`s first large-scale credit facility, linked to both the sterling overnight index average (SONIA) and the Secure Financing Rate (SOFR). On March 12, 2020, British American Tobacco (“BAT”) announced that it had signed a new $6 billion revolving credit facility with a consortium of 21 banks. Under the terms of the facility, LIBOR interest rates for the pound sterling and the U.S. dollar will be replaced by SONIA or SOFR on a future date defined by BAT, the first anniversary of the signing date or (if the closing of the LIBOR settlement has not taken place), once the banking market is fully prepared to move to alternative interest rates without risk. The facility will also be available for euro subscriptions and euro subscriptions will remain based on EURIBOR. “We are proud of the work we have done to advise the loan consortium on this loan contract – another first-rate transaction for A-O. Our multidisciplinary team brought together our experienced corporate Lending team and teams who focused daily on the libOR transition in London, New York and Amsterdam. I think that the execution of this loan will pave the way for future loan agreements with several currencies, since libor will be replaced.

In this note, we look at precedents and look at some of the practical solutions these instruments offer for the development of interest rate rules in interest-based risk-free loan contracts. The Group`s main banking facility is a GBP 6 billion syndicated revolving credit facility, mainly used for liquidity purposes. It is guaranteed by British American Tobacco p.l.c. The Bat Facility Agreement is a syndic mechanism involving 21 banks with Barclays as joint coordinator and HSBC as an agent. Comments by British American Tobacco and HSBC following the implementation of the facility agreement showed that certain characteristics of the MTD ACCORD were based on the existing relationships between the counterparties, which enabled them to complete the transaction before the RFR agreements were concluded.

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