Sidley represented GlaxoSmithKline plc (GSK) on the refinancing of its core revolving credit facilities consisting of US$2.5 billion of 364-day facilities and £1.9 billion of multi-currency three-year facilities. These facilities replace GSK’s existing revolving credit facilities provided by its panel of twelve relationship banks on a bilateral basis.

In anticipation of the cessation of the London Interbank Offered Rate (LIBOR), these are the first large-scale credit facilities executed globally to be linked from the commencement date to both the Sterling Overnight Index Average (SONIA) and the Secured Overnight Financing Rate (SOFR), compounded in arrear.

The loan agreements include fixed-spread adjustment amounts for both SONIA and SOFR, which form a separate element of the composite interest rate. This approach helps GSK to avoid paying a higher all-in rate in the event of negative SONIA/SOFR. Interest periods have been set at one month, with a fixed-spread adjustment reflecting the five-year historic median of spreads between the relevant LIBORs and SONIA and SOFR.

The facilities use a five business day lookback (also known as the “lag” methodology) instead of the “observation shift” methodology that had previously been used in other Risk Free Rate (RFR) transactions. This is to align with the latest UK and U.S. regulatory and industry working group recommendations while achieving consistency across currencies and geographies.

The Sidley team in London was led by David Howe (partner, Capital Markets), and included Benedetta Pacifico (senior associate, Capital Markets), David Kucharski (associate, Capital Markets), Alistair Gunn (trainee, Capital Markets), Oliver Currall (partner, Tax), and Oliver Rosshandler (associate, Tax).

Allen & Overy LLP in London (partner, Greg Brown and associate, Dominique Crowley) advised HSBC Bank plc in its capacity as Risk Free Rate Coordinator.