UK fund managers have called on companies to take urgent action to ensure they stop issuing bonds using the Libor benchmark by the end of 2021 and has offered to work with them to agree on new reference rates.
The Investment Association (IA), which represents UK fund managers, has written to companies issuing Libor-linked sterling bonds, warning that there is a risk of “significant market disruption” if bonds still reference the Libor rate after the December 31 deadline imposed by the Financial Conduct Authority (FCA) and the Bank of England.
Data provided by the International Capital Markets Authority shows that the value of Libor-linked bonds yet to move to a new rate exceeds £108 billion.
While calling on companies to step up their transition plans, the IA is also offering to work with companies to agree a fair transition to a risk-free reference rate or consider alternative arrangements such as buybacks.
“Time is running out for companies to transition their Libor-linked bonds,” said Galina Dimitrova, director for investments and capital markets at the Investment Association. “We stand ready to help both companies and investors as they complete the process.”
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