Source - LSE Regulatory
RNS Number : 6419M
Gosforth Funding 2018-1 PLC
22 January 2021
 

 

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN OR INTO, OR TO ANY PERSON LOCATED OR RESIDENT IN, ANY JURISDICTION WHERE IT IS UNLAWFUL TO RELEASE, PUBLISH OR DISTRIBUTE THIS DOCUMENT. THIS NOTICE OR THE ELECTRONIC TRANSMISSION THEREOF DOES NOT CONSTITUTE OR FORM PART OF, AND SHOULD NOT BE CONSTRUED AS, AN OFFER FOR SALE, EXCHANGE OR SUBSCRIPTION OF, OR A SOLICITATION OF ANY OFFER TO BUY, EXCHANGE OR SUBSCRIBE FOR, ANY SECURITIES OF THE ISSUER OR ANY OTHER ENTITY IN ANY JURISDICTION.

If you are in any doubt as to the action you should take, you are recommended to seek your own financial and legal advice, including in respect of any tax consequences, immediately from your stockbroker, bank manager, solicitor, accountant or other financial, tax or legal adviser authorised under the Financial Services and Markets Act 2000 (if you are in the United Kingdom), or from another appropriately authorised independent financial adviser and such other professional advice from your own professional advisers as you deem necessary.

In accordance with normal practice, none of the Issuer, the Solicitation Agent, the Note Trustee, the Security Trustee, the Agents or their affiliates (or their respective directors, employees, officers, consultants or agents) expresses any view or opinion whatsoever as to the Proposed Base Rate Modification, the Proposed Amendments, the Amended Documents (each as defined below) or the information set out in this Notice; and none of the Solicitation Agent, the Note Trustee nor the Security Trustee makes any representation or recommendation whatsoever as to any action to be taken or not taken by Noteholders in relation to the Proposed Base Rate Modification, the Proposed Amendments, the Amended Documents or this Notice, or any document prepared in connection with any of them. Accordingly, the Issuer, the Solicitation Agent, the Note Trustee and the Security Trustee urge Noteholders who are in doubt as to the impact of the implementation of the Proposed Base Rate Modification, the Proposed Amendments, the Amended Documents or this Notice or any document prepared in connection with any of them (including any tax or other consequences), to seek their own independent financial, tax and legal advice. Each of the Issuer, the Note Trustee, the Security Trustee and the Solicitation Agent has not made, nor will they make, any assessment of the merits of the Proposed Base Rate Modification, the Proposed Amendments, the Amended Documents or this Notice or of the impact of the Proposed Base Rate Modification, the Proposed Amendments, the Amended Documents or this Notice on the interests of the Noteholders either as a class or as individuals.

 

GOSFORTH FUNDING 2018‑1 PLC
8th Floor
100 Bishopsgate
London EC2N 4AG
United Kingdom
(the "Issuer")

NOTICE OF BASE RATE MODIFICATION

to the holders of the following notes of the Issuer presently outstanding

US$557,895,000 (current amount outstanding US$218,490,617) Class A1 Mortgage Backed Floating Rate Notes due 2060
Reg S ISIN: XS1863916679; Rule 144A ISIN: US38312RAA14; CUSIP: 38312R AA1
(the "Class A1 Notes")

£409,935,000 (current amount outstanding £254,506,101) Class A2 Mortgage Backed Floating Rate Notes due 2060
Reg S ISIN: XS1863917057; Rule 144A ISIN: XS1863917131
(the "Class A2 Notes")

£441,684,000 (current amount outstanding £441,684,000) Class A3 Mortgage Backed Floating Rate Notes due 2060
Reg S ISIN: XS1863917214; Rule 144A ISIN: XS1863917305
(the "Class A3 Notes")

£49,956,000 (current amount outstanding £49,956,000) Class M Mortgage Backed Floating Rate Notes due 2060
Reg S ISIN: XS1863917644; Rule 144A ISIN: XS1863917727
(the "Class M Notes")

£99,911,000 (current amount outstanding £99,911,000) Class Z Mortgage Backed Fixed Rate Notes due 2060
Reg S ISIN: XS1863918022; Rule 144A ISIN: XS1863918451
(the "Class Z Notes")

(together, the "Noteholders" and the "Notes", respectively)

 

THIS NOTICE IS IMPORTANT AND REQUIRES THE IMMEDIATE ATTENTION OF NOTEHOLDERS.

NOTICE IS HEREBY GIVEN by the Issuer to the Noteholders in accordance with Condition 14 (Notice to Noteholders) that the Issuer intends to amend the rate of interest applicable to the Class A2 Notes, the Class A3 Notes and the Class M Notes (the "Relevant Notes") and make certain other amendments with effect from 25 February 2021, by amending the documents specified in this Notice in order to effect the Proposed Base Rate Modification (as defined below). 

Background

1.       We refer to the master definitions and construction schedule dated 24 September 2018 and signed for the purposes of identification by Clifford Chance LLP and Freshfields Bruckhaus Deringer LLP (the "Master Definitions and Construction Schedule"). Terms used in this Notice but not defined herein shall have the meanings given to such terms in the Master Definitions and Construction Schedule. 

2.       We also refer to the trust deed dated 24 September 2018 between the Issuer and Citicorp Trustee Company Limited as note trustee (as amended, supplemented and restated from time to time, the "Trust Deed"), including the terms and conditions of the Notes set out at Schedule 3 thereto (the "Conditions"), pursuant to which the Notes were constituted on the terms and subject to the conditions contained therein.

3.       Pursuant to Condition 11(F)(a)(iii) (Additional Right of Modification), the Issuer may make, and the Note Trustee shall be obliged without any consent or sanction of the Noteholders or  any of the other Secured Creditors, to concur in making, any modifications (other than a Basic Terms Modification) to the Conditions and/or the Transaction Documents or enter into any new, supplemental or additional documents that the Issuer considers necessary in order to change the base rate in respect of the Notes provided that such modification is undertaken as a result of the circumstances set out in Condition 11(F)(a)(iii)(A)(I), the Alternative Base Rate is a rate that satisfies Condition 11(F)(a)(iii)(A)(II) and the other procedural formalities of Condition 11(F) (Additional Right of Modification) have been met.

4.       The Financial Conduct Authority of the UK (the "FCA") has confirmed that that it will no longer persuade or compel banks to submit rates for the calculation of the LIBOR benchmark after the end of 2021 and expects that some panel banks will cease contributing to LIBOR at such time. In addition, the Bank of England and the FCA have announced that they have mandated a working group to promote a broad-based transition to SONIA across sterling bond, loan and derivative markets, so that SONIA is established as the primary sterling interest rate benchmark by the end of 2021. Therefore, the continuation of LIBOR on the current basis cannot and will not be guaranteed after 2021 and regulators have urged market participants to take active steps to implement the transition to SONIA and other risk-free rates ahead of this deadline. In this regard we refer to:

(a)     the speech of Andrew Bailey, the Chief Executive of the FCA, on 27 July 2017 entitled "The Future of LIBOR";

(b)     the statement of the FCA entitled "FCA Statement on LIBOR panels" dated 24 November 2017;

(c)     the speech of Andrew Bailey, the Chief Executive of the FCA, on 12 July 2017 entitled "Interest rate benchmark reform - transition to a world without LIBOR";

(d)     the "Dear CEO Letter" sent by the FCA and the Prudential Regulation Authority to major banks and insurers and published on the FCA website, dated 19 September 2018, relating to the need to transition from LIBOR to alternative benchmarks;

(e)     the speech of Andrew Bailey, the Chief Executive of the FCA, on 15 July 2019 entitled "The Future of LIBOR"; and

(f)      the statement of the FCA entitled "Transition from LIBOR" dated 4 September 2019,

each of which is available from the website of the FCA at www.fca.org.uk.

Proposed Base Rate Modification

5.       The Issuer intends to amend:

(a)          the Conditions;

(b)          the Trust Deed;

(c)          the Master Definitions and Construction Schedule;

(d)          the Basis Rate Swap Agreements;

(e)          the Currency Swap Agreement;

(f)           the Mortgage Sale Agreement;

(g)          the Administration Agreement; and

(h)          the Subordinated Loan Agreement,

(the "Amended Documents") in order:

(a)     to remove references to "Sterling LIBOR";

(b)     to change the Screen Rate in relation to the Relevant Notes to refer to a "SONIA"‑based rate;

(c)     to change the interest rate calculation provisions to refer to a "SONIA"‑based rate;

(d)     to change the "Party B Floating Rate Option" in the confirmation to the Currency Swap Agreement from a "LIBOR"‑based rate to a "SONIA"‑based rate; and

(e)     to make such other amendments as are necessary or advisable in the reasonable judgment of the Issuer to facilitate such change,

(the "Proposed Base Rate Modification").

The Amended Documents in blackline format will be available for viewing shortly after the date of this Notice at the following link https://www.virginmoneyukplc.com/investor-relations/debt-investors/gosforth-funding-transactions/gosforth-funding-transactions, the changes set out therein being the "Proposed Amendments".

6.       In connection with the Proposed Base Rate Modification, an adjustment to the Relevant Margin on the Relevant Notes will be calculated to reflect the basis differential between LIBOR and SONIA and to achieve a comparable total interest rate payable on the Relevant Notes following the Proposed Amendments becoming effective.  The intended method of calculation and intended date of calculation is set out in Appendix 1 (Margin Adjustment Paper) hereto (the "Margin Adjustment Paper").

7.       The Issuer Cash Manager (on behalf of the Issuer) has given written notice to the Rating Agencies of the proposed modification and, as at the date of this Notice, none of the Rating Agencies has indicated that such modification would result in (a) a downgrade, withdrawal or suspension of the then current ratings assigned to any Notes by such Rating Agency or (b) such Rating Agency placing any Notes on rating watch negative (or equivalent).

8.       For the avoidance of doubt, the Proposed Base Rate Modification will not amend the Rate of Interest applicable to the Class A1 Notes.

Conditions to Proposed Base Rate Modification

9.       It is proposed by the Issuer that the Proposed Base Rate Modification be made to the Conditions and certain Transaction Documents as a result of:

(a)     a public statement by the FCA as supervisor of the administrator of LIBOR that LIBOR will be permanently or indefinitely discontinued; and

(b)     a public statement by the FCA as supervisor of the administrator of LIBOR that LIBOR might no longer be used and that its use is subject to restrictions or adverse consequences,

as described in paragraph 3 above.

10.     The Proposed Base Rate Modification, therefore, falls within limbs (4) and (5) of Condition 11(F)(a)(iii)(A)(I).

11.     The Alternative Base Rate is a function of the Sterling Over Night Index Average, which, therefore, satisfies Condition 11(F)(a)(iii)(A)(II).

12.     Unless the Proposed Base Rate Modification is objected to by the Class A1 Noteholders, the Class A2 Noteholders and the Class A3 Noteholders (collectively, the "Class A Noteholders") in accordance with this Notice (as described below), and provided that the other requirements of Condition 11(F)(a)(iii) have otherwise been met, the Issuer Cash Manager (on behalf of the Issuer) will certify to the Note Trustee in writing that the requirements of Condition 11(F)(a)(iii) have been met (the "Base Rate Modification Certificate") and the Note Trustee will then enter into such Amended Documents to effect the Proposed Base Rate Modification in reliance solely on such Base Rate Modification Certificate.

13.     Pursuant to Condition 11(F)(a)(iii)(A) (Additional Right of Modification), the Note Trustee is required to concur with the Issuer in making the Proposed Base Rate Modification if:

(a)     the Issuer has certified in writing to the Note Trustee that Noteholders representing at least 10 per cent. of the aggregate Sterling Equivalent Principal Amount Outstanding of the Most Senior Class of Notes outstanding (being the Class A1 Notes, the Class A2 Notes and the Class A3 Notes (collectively, the "Class A Notes")) have not contacted the Issuer or the Principal Paying Agent in writing (or otherwise in accordance with the then current practice of any applicable clearing system through which such Notes may be held) within such notification period notifying the Issuer or Principal Paying Agent that such Noteholders do not consent to the Proposed Modifications within 30 calendar days of the date of this Notice; and

(b)     all other conditions set out in Condition 11(F)(a)(iii)(A) (Additional Right of Modification) have been satisfied.

14.     If objections are received in accordance with the procedures set out in this Notice from Class A Noteholders representing at least 10% of the aggregate Sterling Equivalent Principal Amount Outstanding of the Class A Notes then outstanding by the Deadline (as defined below), the Issuer will not be entitled to enter into the Proposed Amendments unless an Extraordinary Resolution of the Class A Noteholders is subsequently passed approving the Proposed Base Rate Modification.

15.     Pursuant to Condition 11(F)(b) (Additional Right of Modification), when implementing any modification pursuant to Condition 11(F) (Additional Right of Modification) (save to the extent that the Note Trustee considers that the proposed modification would constitute a Basic Terms Modification), the Note Trustee shall not consider the interests of the Noteholders, any other Secured Creditor or any other person and shall act and rely solely, without further enquiry or Liability, on any certificate (including any Base Rate Modification Certificate) or evidence provided to it by the Issuer (or the Issuer Cash Manager on behalf of the Issuer), as the case may be, pursuant to Condition 11(F) (Additional Right of Modification) and shall not be liable to the Noteholders, any other Secured Creditor or any other person for so acting or relying, irrespective of whether any such modification is or may be materially prejudicial to the interests of any such person.

16.     Copies of the Trust Deed, drafts of the Amended Documents and related documents may be inspected in electronic or physical form during usual business hours at the registered office of the Issuer or the Principal Paying Agent.  Capitalised terms used but not otherwise defined herein shall have the meanings given to them in the documents specified in this Notice, as applicable.

Procedure for objecting to Proposed Base Rate Modification

17.     Class A Noteholders who wish to notify the Issuer that they object to the Proposed Base Rate Modification must do so by 4.00 p.m. (London time) on 22 February 2021 (the "Deadline"). No physical meeting of the Class A Noteholders will be held.

18.     NO ACTION IS REQUIRED TO BE TAKEN BY ANY NOTEHOLDER WHO DOES NOT WISH TO OBJECT TO THE PROPOSED BASE RATE MODIFICATION.

19.     Each Class A Noteholder that wishes to vote to object to the Proposed Base Rate Modification must ensure that:

(a)     it gives electronic voting instructions to the relevant clearing system (in accordance with that clearing system's procedures):

(i)         TO REJECT the Proposed Base Rate Modification; and

(ii) specifying the full name of the direct participant submitting the voting instruction and the account number(s) for the party making the voting submission(s),

such that the Tabulation Agent will receive the voting instructions of that Class A Noteholder on or before the Deadline; and

(b)     the relevant clearing system has received irrevocable instructions (with which they have complied) to block the Class A Notes held by such holder in the securities account to which they are credited with effect from and including the day on which the electronic voting instruction is delivered to the relevant clearing system so that no transfers may be effected in relation to the Class A Notes held by such holder at any time after such date until the Deadline. Votes will only apply to the Principal Amount Outstanding of Class A Notes blocked in the relevant clearing system.

20.     Class A Notes should be blocked in accordance with the procedures of the relevant clearing system and the deadlines required by the relevant clearing system. Class A Noteholders should note that clearing system deadlines may be different from the Deadline set out herein, and as such Class A Noteholders who wish to object should check the relevant clearing system's procedures and deadlines ahead of the Deadline.

21.     Any beneficial owner of Class A Notes who is not a direct participant in the clearing systems must contact its broker, dealer, bank, custodian, trust company or other nominee to arrange for the accountholder in Euroclear or Clearstream, Luxembourg, as the case may be, through which it holds Class A Notes to deliver an electronic voting instruction in accordance with the requirements of the relevant clearing system and procure that the Class A Notes are blocked in accordance with the normal procedures of the relevant clearing system and the deadlines imposed by such clearing system. For Class A1 Notes held through DTC, only those participants shown in DTC's records on 19 February 2021 (the "Record Date") as holding a specified Principal Amount Outstanding of the Class A1 Notes will be entitled to deliver a voting instruction. An objection notice in the form set out in Appendix 3 (Form of Objection Notice) (an "Objection Notice") must be delivered by the relevant DTC Participant by e-mail to the Tabulation Agent at its e-mail address set forth below, so as to be received by the Tabulation Agent on or before the Deadline.

22.     Each Class A Noteholder that wishes to object to the Proposed Base Rate Modification should ensure that the relevant blocking instructions to the relevant clearing system can be allocated to the relevant electronic voting instruction. For the avoidance of doubt, each electronic objection instruction must have an individual matching blocking instruction.

23.     By providing instructions as described above, each beneficial owner of Class A Notes authorises the clearing systems at which its account is maintained to disclose to the Tabulation Agent, the Principal Paying Agent, the Note Trustee and the Issuer, confirmation that it is the beneficial owner of such Class A Notes and the Principal Amount Outstanding of such Class A Notes.

24.     Following expiry of the Deadline, the Tabulation Agent will calculate the number of objection instructions received and notify each of the Issuer, the Note Trustee and the Security Trustee.  If "Reject" votes are received from Class A Noteholders representing at least 10 per cent. of the aggregate Sterling Equivalent Principal Amount Outstanding of the Class A Notes by the Deadline, the Issuer will not be entitled to enter into the Proposed Amendments unless an Extraordinary Resolution of the Class A Notes is subsequently passed approving the Proposed Amendments.  If the 10 per cent. threshold is not reached, the Issuer, the Note Trustee, the Security Trustee and the other parties to the Amended Documents will (subject to the satisfaction of the other requirements of Condition 11(F)(a)(iii)) enter into the Amended Documents which will have effect on and from the Payment Date falling on 25 February 2021 (with pricing in relation to the amendments to the Relevant Margin set to occur on or around 24 February 2021) and Noteholders will be bound by such Proposed Amendments. Votes delivered in favour of the Proposed Amendments will not be counted.

25.     Additional notifications will be made to Noteholders in accordance with Condition 14 (Notice to Noteholders) as soon as reasonably practicable following:

(a)     the Deadline, notifying Noteholders of the voting results;

(b)     the Pricing Date (as defined in the Margin Adjustment Paper), notifying Noteholders of the Adjusted Margins, the Adjusted Step-Up Margins, the LIBOR vs SONIA Interpolated Basis, the Forward Adjustment Spread and the Step-Up Margin Adjustment (all as defined in the Margin Adjustment Paper); and

(c)     the entry into the Amended Documents.

26.     Class A Noteholders with questions and requests for assistance in connection with (i) this Notice are requested to contact the Issuer or Lloyds Bank Corporate Markets plc in its capacity as the solicitation agent (the "Solicitation Agent") and (ii) the delivery of instructions for the Class A Notes are requested to contact Lucid Issuer Services Limited as tabulation agent (the "Tabulation Agent") using the details set out below.

Contact Details:

Gosforth Funding 2018‑1 plc
8th Floor
100 Bishopsgate
London EC2N 4AG

Email:   corpservices@lawdeb.com

Attention: Mark Filer / Rich Lynn

With a copy to:

Clydesdale Bank PLC
Jubilee House
Gosforth
Newcastle upon Tyne NE3 4PL

Email:   TreasuryFunding@Virginmoney.com

Attention:  Treasury Funding

Lloyds Bank Corporate Markets plc
10 Gresham Street
London EC2V 7AE
United Kingdom

Tel: +44 20 7158 1726 / 1719

Email: liability.management@lloydsbanking.com

Attention: Liability Management

Lucid Issuer Services Limited
Tankerton Works
12 Argyle Walk
London WC1H 8HA
United Kingdom

Tel: +44 20 7704 0880

Attention: Owen Morris

Email: virginmoney@lucid‑is.com

27.     The delivery of this Notice shall not, under any circumstances, create any implication that the information contained in this Notice is correct as of any time subsequent to the date hereof or that there has been no change in the information set forth in this Notice or in the affairs of the Issuer or that the information in this Notice has remained accurate and complete. None of the Solicitation Agent, the Tabulation Agent, the Note Trustee, the Security Trustee or the Agents (or their respective affiliates, directors, employees, officers, consultants or agents) accepts any responsibility for the information contained in this Notice.

28.     None of the Note Trustee, the Security Trustee, the Solicitation Agent, the Tabulation Agent or the Agents (or their respective affiliates, directors, employees, officers, consultants or agents) makes any representation that all relevant information has been disclosed to Noteholders in or pursuant to this Notice or otherwise. Noteholders should take their own independent legal, financial, tax or other advice on the merits and the consequences of voting to object to the Proposed Base Rate Modification, including any tax consequences, and on the impact of the implementation of the Proposed Base Rate Modification.

29.     None of the Note Trustee, the Security Trustee, the Solicitation Agent, the Tabulation Agent or the Agents (or their respective affiliates, directors, employees, officers, consultants or agents) or any other party to the Amended Documents or any other person, except the Issuer, has independently verified, or assumes any responsibility for, the accuracy, completeness, validity or correctness of the information and statements contained in this Notice.

30.     No person has been authorised to make any recommendation on behalf of the Issuer, the Note Trustee, the Security Trustee, the Solicitation Agent, the Tabulation Agent or the Agents (or their respective affiliates, directors, employees, officers, consultants or agents) as to whether or how a Noteholder should object in connection with the Proposed Base Rate Modification. No person has been authorised to give any information, or to make any representation in connection therewith, other than those contained herein. If made or given, such recommendation or any such information or representation must not be relied upon as having been authorised by the Issuer, the Note Trustee, the Security Trustee, the Solicitation Agent, the Tabulation Agent or the Agents (or their respective affiliates, directors, employees, officers, consultants or agents).

31.     This Notice is issued and directed only to the Noteholders and no other person shall, or is entitled to, rely or act on, or be able to rely or act on, its contents, and it should not be relied upon by any Noteholder for any purpose other than the Proposed Base Rate Modification. For the avoidance of doubt, any Class A Notes held by the Issuer, the Seller, Clydesdale Bank PLC or any holding company of Clydesdale Bank PLC or by any person for the benefit of Clydesdale Bank PLC or any holding company of Clydesdale Bank PLC shall be deemed not to be outstanding.

32.     The Solicitation Agent is entitled to have or hold positions in the Notes either for their own account or for the account, directly or indirectly, of third parties and may make or continue to make a market in, or subject to the provisions of the Trust Deed, vote in respect of, or act as principal in any transactions in, or relating to, or otherwise act in relation to, the Notes and may or may not, subject to the provisions of the Trust Deed, submit or deliver valid instructions in respect of the Notes. The Solicitation Agent is entitled to continue to hold or dispose of, in any manner it may elect, the Notes that it may hold as at the date of this Notice or, from such date, to acquire further Notes, subject to applicable law and may or may not, subject to the provisions of the Trust Deed, submit or deliver valid instructions in respect of such Notes. 

33.     Each person receiving this Notice is deemed to acknowledge that such person has not relied on the Issuer, the Note Trustee, the Security Trustee, the Solicitation Agent, the Tabulation Agent, the Principal Paying Agent or any other party to the Transaction Documents in connection with its decision on how to vote in relation to the Proposed Amendments.  Each such person must make its own analysis and investigation regarding the Proposed Base Rate Modification, the Proposed Amendments and the Amended Documents and make its own voting decision, with particular reference to its own investment objectives and experience, and any other factors which may be relevant to it in connection with such voting decision. If such person is in any doubt about any aspect of the Proposed Base Rate Modification, the Proposed Amendments and the Amended Documents and/or the action it should take, it should consult its professional advisers. Each such person should also carefully consider the risk factors set out in Appendix 2 (Risk Factors) to this Notice prior to making a voting decision.

 

This Notice is given by

as Issuer

Dated 22 January 2021



 

APPENDIX 1

MARGIN ADJUSTMENT PAPER

The Proposal

1.         The Proposal

Conversion of the Rate of Interest for the Class A2 Mortgage Backed Floating Rate Notes due 2060 (Reg S ISIN: XS1863917057; Rule 144A ISIN: XS1863917131) (the "Class A2 Notes"), the Class A3 Mortgage Backed Floating Rate Notes due 2060 (Reg S ISIN: XS1863917214; Rule 144A ISIN: XS1863917305) (the "Class A3 Notes") and the Class M Mortgage Backed Floating Rate Notes due 2060 (Reg S ISIN: XS1863917644; Rule 144A ISIN: XS1863917727) (the "Class M Notes" and, together with the Class A2 Notes and the Class A3 Notes, the "Notes") issued by Gosforth Funding 2018-1 plc from LIBOR to SONIA, with a consequential adjustment to the Relevant Margin (as defined below) and the Step-Up Margin (as defined below) of each Class of Notes. Together, the Relevant Margin and the Step-Up Margin shall be collectively referred to herein as the "Applicable Margins".

2.         Rationale for the Proposal

Due to the differences in the nature of LIBOR and SONIA, the replacement of LIBOR as the reference rate for each of the Notes will also require corresponding adjustments to the Applicable Margins payable in respect of the Notes. The pricing methodology proposed for the amendment of the Applicable Margins for each of the Notes on conversion of the reference rate from LIBOR to SONIA uses only market observable screen rates.

The date from which the proposed change in reference rate is to occur for each of the Notes will be the Payment Date falling in February 2021, being 25 February 2021 (the "Effective Date").

The determination of the relevant market observable screen rates will take place at or around 2p.m. London time (the "Pricing Time") on 24 February 2021 (the "Pricing Date") which is one London Business Day prior to the Effective Date. To reflect the time between the Pricing Date and the Effective Date, a Forward Adjustment Spread to be determined by the Solicitation Agent at its sole discretion will be applied to the Adjusted Margins (as both defined and detailed below). The Forward Adjustment Spread for each of the Notes will be determined at or around the Pricing Time on the Pricing Date and announced in conjunction with the publication of the LIBOR vs SONIA Interpolated Basis and the Step-Up Margin Adjustment (each as defined below).[1]

For the avoidance of doubt, the reference rate applicable to each of the Notes up to but excluding the Effective Date will continue to be 3‑month GBP LIBOR and the interest payment made on the Effective Date will not be affected by the pricing methodology described herein.

3.         The Adjusted Margins

The relevant Rate of Interest for each of the Notes to be effective on the Effective Date to (but excluding) the Step-Up Date (as defined below) will be equal to Compounded Daily SONIA plus the relevant Adjusted Margin (determined as follows):

The relevant "Adjusted Margin" will be the sum of:

A.               the Relevant Margin; plus

B.               the LIBOR vs SONIA Interpolated Basis; plus

C.               the Forward Adjustment Spread

where:

"Relevant Margin" means:

(a)              in respect of the Class A2 Notes, 0.58 per cent. per annum;

(b)              in respect of the Class A3 Notes, 0.70 per cent. per annum.

(c)              in respect of the Class M Notes, 1.20 per cent. per annum.

"LIBOR vs SONIA Interpolated Basis" is a number of basis points rounded to the nearest 0.1 basis points (with 0.05 basis points rounded upwards) as calculated by the Solicitation Agent at or around the Pricing Time on the Pricing Date by way of linear interpolation of:

in respect of the Class A2 Notes:

(A)           the 1 Year LIBOR vs SONIA Basis (as quoted on the Bloomberg Page ICAB21 at or around the Pricing Time, or such other page as may replace it on that information service, or on such similar or replacement service as may be determined by the Solicitation Agent); and

(B)           the 2 Year LIBOR vs SONIA Basis (as quoted on the Bloomberg Page ICAB21 at or around the Pricing Time, or such other page as may replace it on that information service, or on such similar or replacement service as may be determined by the Solicitation Agent).

in respect of the Class A3 Notes and the Class M Notes:

(A)         the 2 Year LIBOR vs SONIA Basis (as quoted on the Bloomberg Page ICAB21 at or around the Pricing Time, or such other page as may replace it on the information service, or on such  similar or replacement service as may be determined by the Solicitation Agent); and

(B)         the 3 Year LIBOR vs SONIA Basis (as quoted on the Bloomberg Page ICAB21 at or around the Pricing Time, or such other page as may replace it on that information service, or on such similar or replacement service as may be determined by the Solicitation Agent).

The Solicitation Agent will calculate the linear interpolation for the applicable LIBOR vs SONIA Interpolated Basis by reference to the Weighted Average Life for the applicable Class of Notes (the "LIBOR vs SONIA Interpolated Basis") by:

(i)         subtracting the applicable LIBOR vs SONIA basis in sub-paragraph (A) for the relevant Class of Notes from the applicable LIBOR vs SONIA basis in sub-paragraph (B) above for the same Class of Notes and multiplying the result of each subtraction by the relevant Maturity Weight for that Class of Notes (and rounding the result of such multiplication to the nearest 0.1 basis points, with 0.05 basis points rounded upwards); and

(ii)        adding the applicable LIBOR vs SONIA basis in sub-paragraph (A) above for the relevant Class of Notes to the result calculated in accordance with sub-paragraph (i) for the relevant Class of Notes.

If the rate determined for the LIBOR vs SONIA Interpolated Basis is negative then the relevant LIBOR vs SONIA Interpolated Basis shall be deemed to be 0.00 basis points.

"Forward Adjustment Spread" is a number of basis points rounded to the nearest 0.1 basis points (with 0.05 basis points rounded upwards) as calculated by the Solicitation Agent at its sole discretion in accordance with market practice reflecting the time period from the Pricing Date to the Effective Date, and will be determined at or around the Pricing Time on the Pricing Date.

For the purposes of these calculations:

"Maturity Weight" means the amount, expressed as a percentage, calculated for the relevant Class of Notes as follows:

a.         in respect of the Class A2 Notes, the Weighted Average Life (expressed in years) of the Class A2 Notes minus 1;

b.         in respect of the Class A3 Notes, the Weighted Average Life (expressed in years) of the Class A3 Notes minus 2; and

c.         in respect of the Class M Notes, the Weighted Average Life (expressed in years) of the Class M Notes minus 2.

"Weighted Average Life" means the Weighted Average Life for the relevant Class of Notes as at the Pricing Date, rounded to two decimal places, as follows:

A.        in respect of the Class A2 Notes, 1.61 years;

B.         in respect of the Class A3 Notes, 2.50 years; and

C.         in respect of the Class M Notes, 2.50 years.

Assumptions used in calculating the Weighted Average Life

In determining the Weighted Average Life for the relevant Class of Notes, the CFT function of the relevant Bloomberg page has been used as follows for each Class of Notes:

(A)           in respect of the Class A2 Notes, GFUND 2018-1A A2 Mtge;

(B)            in respect of the Class A3 Notes, GFUND 2018-1A A3 Mtge; and

(C)            in respect of the Class M Notes, GFUND 2018-1A M Mtge. 

The following assumptions have been used to calculate the applicable Weighted Average Life for each Class of Notes:

(a)            the Pricing Date is 24 February 2021;

(b)            the Issuer exercises its option to redeem the Notes on the Step-Up Date;

(c)            the Loans are subject to a constant prepayment rate ("CPR") (in addition to scheduled principal redemptions) of 10 per cent.;

(d)            no Loan is delinquent or in default;

(e)            no Loan is on payment holiday; and

(f)             the Current Balance of Notes is as at the Payment Date falling on 25 November 2020.

All other assumptions remain in line with those outlined in the section headed "Maturity and Prepayment Considerations" of the prospectus dated 19 September 2018 published by the Issuer in relation to the Notes.

4.         The Adjusted Step-Up Margins

The Rate of Interest payable on each of the Class A2 Notes, Class A3 Notes and the Class M Notes from (and including) the Payment Date falling in August 2023 (the "Step-Up Date") will be equal to Compounded Daily SONIA plus the relevant Step-Up Margin (as defined below) as adjusted as set out below (together the "Adjusted Step-Up Margins" and each an "Adjusted Step-Up Margin").

The relevant Step-Up Margin for each Class of Notes will be adjusted as follows:

(a)              the Step-Up Margin; plus

(b)              Step-Up Margin Adjustment,

where:

"Step-Up Margin" means:

A.               in respect of the Class A2 Notes, 1.16 per cent. per annum;

B.               in respect of the Class A3 Notes, 1.40 per cent. per annum; and

C.               in respect of the Class M Notes, 2.40 per cent. per annum.

"Step-Up Margin Adjustment" means the 3 month tenor spread adjustment between GBP LIBOR and SONIA, as specified in the column entitled "Spread Adjustments" of the Basis Screen Page (as defined below) in respect of the 5 year median difference between 3 month LIBOR and realised SONIA fixings within the same 3 month period, as calculated by Bloomberg Index Services Limited (or a successor provider as approved and/or appointed by ISDA from time to time) and rounded to the nearest 0.1 basis points (with 0.05 basis points rounded upwards).[2]

The "Basis Screen Page" is the Bloomberg page GDCO 9003 6 1, or any successor page.

For the avoidance of doubt:

(A)           the 3‑month tenor spread adjustment between GBP LIBOR and SONIA to be used for the purposes of the Step-Up Margin Adjustment will be the rate appearing on the Basis Screen Page as at the Pricing Time on the Pricing Date;

(B)            the 3‑month tenor spread adjustment between GBP LIBOR and SONIA can also be found (I) on the Bloomberg screen "SBP0003M Index"; and (II) from the Bloomberg page "FBAK" by selecting "Official Spread Adjustments between the Adjusted Reference Rates and IBOR Rates" then "GBP LIBOR" as the applicable IBOR ("Alternative Sources"); and

(C)            in the event that the Step-Up Margin Adjustment cannot be obtained from either the Basis Screen Page or the Alternative Sources, the Solicitation Agent in its sole discretion shall determine a similar or replacement service for the purposes of showing the 3‑month tenor spread adjustment between GBP LIBOR and SONIA. 

The method of calculation specified in the Step-Up Margin Adjustment above accords with the methodology for such adjustments contained in ISDA IBORs Fallback Supplement found at http://assets.isda.org/media/3062e7b4/23aa1658-pdf/.

The Adjusted Margins, the Adjusted Step-Up Margins, the LIBOR vs SONIA Interpolated Basis, the Forward Adjustment Spread and the Step-Up Margin Adjustment will be announced to Noteholders in accordance with Condition 14 (Notice to Noteholders) as soon as practicable following the Pricing Time on the Pricing Date.

The detailed provisions relating to the calculation of Compounded Daily SONIA are set out in the Amended Documents which will be available for viewing shortly after the date of this Notice at the following link: https://www.virginmoneyukplc.com/investor-relations/debt-investors/gosforth-funding-transactions/gosforth-funding-transactions.



 

APPENDIX 2

RISK FACTORS

Responsibility for complying with the procedures for submitting instructions in connection with the Proposed Base Rate Modification

Noteholders are solely responsible for complying with all of the procedures for submitting instructions. None of the Issuer, the Solicitation Agent, the Principal Paying Agent, the Note Trustee, the Security Trustee or the Tabulation Agent assumes any responsibility for informing Noteholders of irregularities with respect to instructions.

No assurance that the Proposed Base Rate Modification will be implemented

Until the Proposed Base Rate Modification is passed, the Amended Documents are executed and other requirements of Condition 11(F)(a)(iii) (Additional Right of Modification) are met, no assurance can be given that the Proposed Base Rate Modification will be implemented in respect of the Notes.

The market continues to develop in relation to risk free rates (including overnight rates) as reference rates for the Relevant Notes

If the Proposed Base Rate Modification is passed and implemented, from and including the Effective Date, the Rate of Interest for the Relevant Notes will be determined on the basis of Compounded Daily SONIA (as set out in the Amended Documents). Compounded Daily SONIA differs from LIBOR in a number of material respects, including (without limitation) that Compounded Daily SONIA is a backwards-looking, compounded, risk-free overnight rate, whereas LIBOR is expressed on the basis of a forward-looking term and includes a risk-element based on inter-bank lending. As such, Class A Noteholders and Class M Noteholders should be aware that LIBOR and SONIA may behave materially differently as interest reference rates for the Relevant Notes. The use of Compounded Daily SONIA as a reference rate for Eurobonds is relatively recent, and is subject to change and development, both in terms of the substance of the calculation and in the development and adoption of market infrastructure for the issuance and trading of bonds referencing Compounded Daily SONIA.

Accordingly, Noteholders should be aware that the market continues to develop in relation to SONIA as a reference rate in the capital markets and its adoption as an alternative to sterling LIBOR. The market or a significant part thereof may adopt an application of SONIA that differs significantly from that set out in the Conditions and used in relation to the Relevant Notes that reference a SONIA rate. Interest on Relevant Notes which reference a SONIA rate is only capable of being determined at the end of the relevant observation period and immediately prior to the relevant Payment Date.

It may be difficult for Class A Noteholders and Class M Noteholders to estimate reliably the amount of interest which will be payable on the Relevant Notes, and certain investors may be unable or unwilling to trade such Relevant Notes without changes to their IT systems, both of which factors could adversely impact the liquidity of such Relevant Notes. Further, if the Relevant Notes become due and payable under Conditions 5 (Redemption and Cancelation) or 9 (Events of Default), the Rate of Interest payable shall be determined on the date the Relevant Notes became due and payable and shall not be reset thereafter. Investors should carefully consider how any mismatch between the adoption of SONIA in the bond, loan and derivatives markets may impact any hedging or other financial arrangements which they may put in place in connection with any acquisition, holding or disposal of any Relevant Notes.

The Step-Up Margin Adjustment may become a fixed value upon the occurrence of an IBOR Cessation Trigger Date

The Step-Up Margin Adjustment (as defined in the Margin Adjustment Paper) is currently published by BISL on a dynamic basis, but upon the occurrence of a "Spread Adjustment Fixing Date" as defined in BISL's IBOR Fallback Rate Adjustments Rule Book the Step-Up Margin Adjustment will become a static figure in line with BISL's published methodology.  This would include, inter alia, a public statement by the FCA that the relevant LIBOR tenor is, or will in the future no longer be, representative of the underlying market and economic reality that the relevant LIBOR tenor is intended to measure. If the Spread Adjustment Fixing Date occurs prior to the Pricing Time on the Pricing Date (as defined in the Margin Adjustment Paper), the Step-Up Margin Adjustment will be determined by reference to such fixed amount specified on the Basis Screen Page as at the Pricing Time and Noteholders in respect of the Relevant Notes will not be entitled to receive any further or additional spread adjustment in the event of a change in any other market assessments or valuations of the appropriate tenor spread adjustment. 

 

 



APPENDIX 3

FORM OF OBJECTION NOTICE

GOSFORTH FUNDING 2018‑1 PLC

US$557,895,000 Class A1 Mortgage Backed Floating Rate Notes due 2060
Reg S ISIN: XS1863916679; Rule 144A ISIN: US38312RAA14; CUSIP: 38312R AA1
(the "Class A1 Notes")

OBJECTION NOTICE

On 22 January 2021 Gosforth Funding 2018-1 announced that it intends to amend the rate of interest applicable to its £409,935,000 Class A2 Mortgage Backed Floating Rate Notes due 2060, £441,684,000 Class A3 Mortgage Backed Floating Rate Notes due 2060 and £49,956,000 Class M Mortgage Backed Floating Rate Notes due 2060 from a "LIBOR"‑based rate to a "SONIA"‑based rate and to make certain other amendments with effect from 25 February 2021 (the "Proposed Base Rate Modification").

FOR USE IN CONNECTION WITH THE NOTICE OF BASE RATE MODIFICATION ISSUED BY GOSFORTH FUNDING 2018-1 PLC DATED 22 JANUARY 2021

(To be completed by a DTC Direct Participant only)

This Objection Notice should be completed and signed by a duly appointed attorney or a duly authorised officer of the direct participant of DTC (the "DTC Direct Participant") who was the holder of certain Class A1 Notes as of 19 February 2021 (the "Record Date") and who is named in the omnibus proxy (the "Omnibus Proxy") that was issued by DTC on the Record Date and lodged with Lucid Issuer Services Limited (the "Tabulation Agent"), acting in its capacity as tabulation agent in respect of the Transaction, by sending a PDF version of this Objection Notice by e‑mail to virginmoney@lucid-is.com not later than 4.00 p.m. (London time)/ 11.00 a.m. (New York time) on 22 February 2021 (the "Deadline") in order to reject the Proposed Base Rate Modification.

We hereby certify to you that:

On date of this Objection Notice and also on the Record Date, we are a holder of the Class A1 Notes with an aggregate principal amount of US$ _____________ and that we are appointed by DTC on the Record Date under the Omnibus Proxy to act.

In respect of the Class A1 Notes with an aggregate principal amount of US$____________  we REJECT the Proposed Base Rate Modification.

No other person has been appointed in respect of the above Class A1 Notes and no voting or consent instructions have been given in relation to such Class A1 Notes.

Capitalised terms used but not defined in this Objection Notice shall have the meanings given to them in the Notice of Base Rate Modification in respect of the Notes dated 22 January 2021.

……………………………….……………………………………

Signed by a duly authorised officer on behalf of the DTC Direct Participant

Name of DTC Direct Participant:

……………………………………….……………

Date:

…………………….……

 

MEDALLION SIGNATURE GUARANTEE[3]

 

 

Place Seal Here

 

 

 



[1]   Based on market data as at 22 January 2021, the indicative Forward Adjustment Spread was less than 0.1bps and no adjustment would have been made.

[2] To the extent that a "Spread Adjustment Fixing Date" (as defined in Bloomberg Index Services Limited ("BISL") IBOR Fallback Rate Adjustments Rule Book) occurs prior to the Pricing Time on the Pricing Date, the Step-Up Margin Adjustment will become a static figure in line with BISL's published methodology and will be determined by reference to such fixed amount specified on the Basis Screen Page as at the Pricing Time.

[3]               Note: Signatures on this Objection Notice need not be guaranteed by an Eligible Institution if the DTC Direct Participant has not completed Paragraphs 2 of the Objection Notice. A recognised participant in the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Program or the Stock Exchange Medallion Program is each an "Eligible Institution".

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