The Finance Brief - 1 July 2013
The Finance Group at Fieldfisher has had a busy past few months working on a number of interesting transactions. This quarter's edition touches on some of the issues which we've come across over this time: the recent updates to the Mandatory Costs Schedules contained in LMA based loan agreements; the use of the right of set-off by lenders as set out in BCOBS; and whether lenders can ever really be confident in invoking a material adverse change event of default. We have also provided a short synopsis of the latest announcement from the British Banking Association on LIBOR changes.
In addition, the team has produced two new briefing guides: the first on lending against life assurance policies and the second in relation to lending against trophy properties.
Finally, it would be remiss of us not to mention our recent shortlisting for The Lawyer Awards 2013 "Private Wealth Team of the Year".
Hannah Salton, Editor
Announcement of LIBOR changes
In previous editions of the Finance Brief we have reported on the findings of the Wheatley Review. The conclusions of this Review have begun to be implemented and on 11 June 2013 the British Banking Association ("BBA") announced that the following two recommendations would be enacted:
- With effect from today (1 July 2013), the publication of individual bank's submissions to LIBOR (for USD, EUR, GBP, CHF and JPY) will be embargoed for 3 months. This means that such individual bank submissions will no longer be available on a daily basis: instead the rates will be released with a 3 month delay. The daily publication of the final LIBOR rates however will not be affected.
The publication of "same day" EUR LIBOR rates for 1 week and 1 month will cease from 31 July 2013. (These 2 rates were supplemental to the "spot" EUR LIBOR rates for all seven LIBOR tenors, which will continue as usual).
Farewell to the Mandatory Costs Schedule?
The Loan Market Association informed the market in March that it would cease to publish its Mandatory Costs Schedule on 1 April. Although this followed a consultation note in January, it nevertheless came as a surprise to many, and has caused some debate about how, if at all, mandatory costs should be dealt with in future.
BCOBS: Use of the right of set-off
The information requirements set out in the Banking: Conduct of Business Sourcebook ("BCOBS") in relation to the exercise of the right of set-off were last updated in 2011. However, in light of queries on the use of the right to set-off we have recently received from our clients we thought it would be useful to remind all those providing retail banking services of the relevant requirements.
Can a lender ever rely on a material adverse change event of default?
The inclusion of material adverse change provisions is common in financial documents, including loan agreements. It is, however, unusual for them to form a key issue in legal proceedings, and a recent High Court decision has much to say on the subject that is of interest.
Trophy properties - some considerations for lenders
Whilst the process of buying a residential property in a "prime" UK location is much the same as buying any other residential property, there will often be factors affecting high value residential properties (referred to as trophy properties) that need particular consideration. We have explored some of these briefly in this article and set out a summary of the key issues and other factors that may be of interest to a lender whose client is considering acquiring a trophy property.