Two London-listed infrastructure funds this week became the latest names to swap their main bank lines from referencing Libor to Sonia. They joined a group that looks, to corporate bankers’ dismay, more like a Covid-era social than a seething mass.
One senior loans banker this week said that most of his bank's sterling loan portfolio was still linked to Libor, just over seven months before the benchmark stops existing in a usable format. Others have made similar admissions. With the summer break looming, plus the length of time it can take to get a syndicate of banks to do, well, anything, lenders have something closer to five months left to get the job done.
Considering the Bank of England has signalled the end of Libor since 2017, this is not an encouraging timeline.
There are some elements in banks’ favour. An imminent deadline will focus corporate treasurers' minds better than something a few years away. Also, there have been some borrowers, although few and far between, that have made the switch and set a precedent. Moving out of the pandemic will help, too.
But for banks to take advantage, they need to improve their communications with corporate clients. Too many borrowers are unaware that, even if they don’t draw their revolvers, or only do so in euros, their multi-currency facilities are still subject to the changes, or that a forgotten hedge put in place a few years ago will stop working, unless they act now.
The switch from Libor is not as simple as many companies think. They risk looking foolish if they continue to think it is only a bank problem.