TIDM41YH
RNS Number : 6692F
Paragon Mortgages (No.25) PLC
19 July 2021
PARAGON MORTGAGES (NO.25) PLC
51 Homer Road, Solihull, West Midlands, B91 3QJ
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.
THIS NOTICE CONTAINS IMPORTANT INFORMATION OF INTEREST TO THE
REGISTERED AND BENEFICIAL OWNERS OF THE NOTES (AS DEFINED BELOW).
IF APPLICABLE, ALL DEPOSITARIES, CUSTODIANS AND OTHER
INTERMEDIARIES RECEIVING THIS NOTICE ARE REQUESTED TO PASS THIS
NOTICE TO SUCH BENEFICIAL OWNERS IN A TIMELY MANNER.
NOTHING IN THE NOTICE OR THE ELECTRONIC TRANSMISSION THEREOF
CONSTITUTES OR CONTEMPLATES AN OFFER OF, AN OFFER TO PURCHASE OR
THE SOLICITATION OF AN OFFER TO SELL SECURITIES IN THE UNITED
STATES OR ANY OTHER JURISDICTION. THE NOTES (AS DEFINED BELOW) HAVE
NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE SECURITIES ACT, OR
THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION OF THE
UNITED STATES, AND THE NOTES MAY NOT BE OFFERED, SOLD OR DELIVERED,
DIRECTLY OR INDIRECTLY, WITHIN THE UNITED STATES OR TO, OR FOR THE
ACCOUNT OR BENEFIT OF, U.S. PERSONS (AS DEFINED IN REGULATION S
UNDER THE SECURITIES ACT) EXCEPT PURSUANT TO AN EXEMPTION FROM, OR
IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND
APPLICABLE STATE OR LOCAL SECURITIES LAWS.
EU MIFID II PRODUCT GOVERNANCE/ PROFESSIONAL INVESTORS AND ECPS
ONLY TARGET MARKET: solely for the purposes of the manufacturers'
product approval process, the target market assessment in respect
of the Notes has led to the conclusion that: (i) the target market
for the Notes is eligible counterparties and professional clients
only, each as defined in Directive 2014/65/EU (as amended or
superseded, "EU MiFID II"); and (ii) all channels for distribution
of the Notes to eligible counterparties and professional clients
are appropriate. Any person subsequently offering, selling or
recommending the Notes (a "distributor") should take into
consideration the manufacturers' target market assessment in
respect of the Notes; however, a distributor subject to EU MiFID is
responsible for undertaking its own target market assessment in
respect of the Notes (by either adopting or refining the
manufacturers' target market assessment) and determining
appropriate distribution channels.
UK MiFIR PRODUCT GOVERNANCE/ PROFESSIONAL INVESTORS AND ECPS
ONLY TARGET MARKET: solely for the purposes of the manufacturers'
product approval process, the target market assessment in respect
of the Notes has led to the conclusion that: (i) the target market
for the Notes is only eligible counterparties and professional
clients, as each term is defined in the FCA Handbook Conduct of
Business Sourcebook ("COBS"); and (ii) all channels for
distribution of the Notes to eligible counterparties and
professional clients are appropriate. Any person subsequently
offering, selling or recommending the Notes (a "distributor")
should take into consideration the manufacturers' target market
assessment; however, a distributor subject to the FCA Handbook
Product Intervention and Product Governance Sourcebook (the "UK
MiFIR Product Governance Rules") is responsible for undertaking its
own target market assessment in respect of the Notes (by either
adopting or refining the manufacturers' target market assessment)
and determining appropriate distribution channels.
IMPORTANT - PROHIBITION OF SALES TO EEA INVESTORS: the Notes are
not intended to be offered, sold or otherwise made available to and
should not be offered, sold or otherwise made available to any
retail investor in the European Economic Area ("EEA"). For these
purposes, a retail investor means a person who is one (or more) of:
(i) a retail client as defined in point (11) of Article 4(1) of EU
MiFID II or (ii) a customer within the meaning of Directive 2016/97
(the "EU Insurance Distribution Directive"), where that customer
would not qualify as a professional client as defined in point (10)
of Article 4(1) of EU MiFID II. Consequently, no key information
document required by Regulation (EU) No 1286/2014 (as amended or
superseded, the "EU PRIIPs Regulation") for offering or selling the
Notes or otherwise making them available to retail investors in the
EEA has been prepared and therefore selling the Notes or otherwise
making them available to any retail investor in the EEA may be
unlawful under the EU PRIIPs Regulation.
IMPORTANT - PROHIBITION OF SALES TO U.K. INVESTORS: the Notes
are not intended to be offered, sold or otherwise made available to
and should not be offered, sold or otherwise made available to any
retail investor in the United Kingdom ("U.K."). For these purposes,
a retail investor means a person who is one (or more) of: (i) a
retail client, as defined in point (8) of Article 2 of Regulation
(EU) No 2017/565 as it forms part of domestic law by virtue of the
European Union (Withdrawal) Act 2018; or (ii) a consumer within the
meaning of the provisions of the Financial Services and Markets Act
2000 ("FSMA") and any rules or regulations made under FSMA which
were relied on immediately before exit day to implement the EU
Insurance Distribution Directive, where that consumer would not
qualify as a professional client, as defined in point (8) of
Article 2(1) of Regulation (EU) No 600/2014 as it forms part of
domestic law of the U.K. by virtue of the European Union
(Withdrawal) Act 2018. Consequently, no key information document
required by the PRIIPs Regulation as its forms part of domestic law
of the U.K. by virtue of the European Union (Withdrawal) Act 2018
(the "UK PRIIPS Regulation") for offering or selling the Notes or
otherwise making them available to retail investors in the U.K. has
been prepared and therefore offering or selling the Notes or
otherwise making them available to any retail investor in the U.K.
may be unlawful under the UK PRIIPS Regulation.
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 FSMA (if you are
in the U.K.), or from another appropriately authorised independent
financial adviser and such other professional advice from your own
professional advisers as you deem necessary.
This Notice is addressed only to holders of the Notes (as
defined below) and persons to whom it may otherwise be lawful to
distribute it ("relevant persons"). It is directed only at relevant
persons and must not be acted on or relied on by persons who are
not relevant persons. Any investment or investment activity to
which this Notice relates is available only to relevant persons and
will be engaged in only with relevant persons.
The following notice and its contents may not be forwarded or
distributed to any other person and may not be reproduced in any
manner whatsoever. Any forwarding, distribution or reproduction of
this document in whole or in part is unauthorised. Failure to
comply with this directive may result in a violation of the laws of
applicable jurisdictions.
In accordance with normal practice, none of the Issuer, the
Solicitation Agent, the Tabulation Agent, the 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
Supplemental Trust Deed, the Amendment Deed (each as defined below)
amending the Relevant Documents or the information set out in this
Notice; and none of the Solicitation Agent, the Tabulation Agent,
the Trustee nor any of the Agents or their affiliates 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 Supplemental Trust Deed, the Amendment Deed
or this Notice, or any document prepared in connection with any of
them.
Accordingly, the Issuer, the Solicitation Agent, the Tabulation
Agent and the Trustee urge Noteholders who are in doubt as to the
impact of the implementation of the Proposed Base Rate
Modification, the Supplemental Trust Deed, the Amendment Deed 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. None of the Issuer,
the Trustee, the Solicitation Agent, the Tabulation Agent, the
Agents or their affiliates (or their respective directors,
employees, officers, consultants or agents) has made, nor will they
make, any assessment of the merits of the Proposed Base Rate
Modification, the Supplemental Trust Deed, the Amendment Deed or
this Notice or of the impact of the Proposed Base Rate
Modification, the Supplemental Trust Deed, the Amendment Deed or
this Notice on the interests of the Noteholders either as a class
or as individuals.
PARAGON MORTGAGES (NO.25) PLC
51 Homer Road
Solihull
West Midlands B91 3QJ
United Kingdom
(the "Issuer")
19 July 2021
NOTICE OF BASE RATE MODIFICATION
to the holders of the following notes of the Issuer:
GBP600,000,000 Class A Mortgage Backed
Floating Rate Notes due 2050
ISIN: XS1785818649; Common Code: 178581864
(the "Class A Notes")
GBP33,500,000 Class B Mortgage Backed
Floating Rate Notes due 2050
ISIN: XS1785821437; Common Code: 178582143
(the "Class B Notes")
GBP30,000,000 Class C Mortgage Backed
Floating Rate Notes due 2050
ISIN: XS1785821940; Common Code: 178582194
(the "Class C Notes")
GBP24,700,000 Class D Mortgage Backed
Floating Rate Notes due 2050
ISIN: XS1785822088; Common Code: 178582208
(the "Class D Notes")
GBP17,648,000 Class Z Mortgage Backed
Floating Rate Notes due 2050
ISIN: XS1785822245; Common Code: 178582224
(the "Class Z Notes")
GBP10,923,000 Class S Mortgage Backed
Floating Rate Notes due 2050
ISIN: XS1785822328; Common Code: 178582232
(the "Class S Notes")
GBP7,952,955 Class S Mortgage Backed
Variable Funding Note due 2050
(the "Class S VFN")
(no amounts being presently outstanding under such note)
(together, the "Noteholders" and the "Notes", respectively).
This Notice is also provided for information purposes only to
the holders of the following certificates:
100 RC1a Residual Certificates
ISIN: XS1786079878; Common Code: 178607987
100 RC1b Residual Certificates
ISIN: XS1786082740; Common Code: 178608274
100 RC2a Residual Certificates
ISIN: XS1786082823; Common Code: 178608282
100 RC2b Residual Certificates
ISIN: XS1786083128; Common Code: 178608312
(together, the "Residual Certificateholders" and "Residual
Certificates", 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 12 (Notices) of the Conditions that the
Issuer intends to amend the rate of interest applicable to the
Notes and make certain other amendments with effect from the
Implementation Date by amending the Documents in order to effect
the Proposed Base Rate Modification (each such term as defined
below). This Notice is given to all classes of Noteholders but only
Eligible Class A Noteholders (as defined below) may object to the
Proposed Base Rate Modification. This Notice is provided to the
Residual Certificateholders for information purposes only.
Background
1. We refer to the trust deed dated 26 April 2018 between the
Issuer and Citicorp Trustee Company Limited as the Trustee (the
"Trust Deed"), including the terms and conditions of the Notes set
out at Schedule 4 thereto (the "Conditions"). Terms used in this
Notice but not defined herein shall have the meanings given to such
terms in the Trust Deed, the Conditions and the Relevant Documents
(as such term is defined in the Trust Deed).
2. For the purposes of this Notice, the following terms are defined:
"Amendment Date" means the date on which each of the
Supplemental Trust Deed and the Amendment Deed (each as defined
below), as applicable, is executed by the relevant parties, which
is expected to be on or around 23 August 2021.
"Implementation Date" means the Interest Payment Date falling on
15 February 2022.
3. We also refer to the Initial Basis Hedge Agreement between
Lloyds Bank Corporate Markets plc and the Issuer, including the
swap confirmations thereof (the "PM25 Swap Confirmations") and the
Approved Credit Support Document entered into in connection
therewith.
4. Pursuant to Condition 15 (Base Rate Modification) and Clause
22 (Base Rate Modification) of the Trust Deed, the Issuer may make,
and the Trustee shall be obliged without any consent or sanction of
the Noteholders, the Residual Certificateholders or any of the
other Secured Creditors to concur with the Issuer in making, any
modification to the Conditions and/or the Relevant Documents to
which it is a party or in relation to which it holds security or
enter into any new, supplemental or additional documents that the
Issuer considers necessary for the purpose of changing the base
rate from LIBOR in respect of all Classes of Notes (but not only
some Classes of Notes) provided that such modification is
undertaken as a result of the circumstances set out in Condition
15(a)(iv), the Alternative Base Rate is a rate that satisfies
Condition 15(a)(v) and the other procedural formalities of
Condition 15 (Base Rate Modification) have been met.
5. On 5 March 2021, the UK Financial Conduct Authority (the
"FCA") announced that all London Inter-Bank Offered Rate ("LIBOR")
settings currently published by ICE Benchmarks Administration, an
authorised administrator regulated and supervised by the FCA, will
either cease to be provided by any administrator or will no longer
be representative of the underlying market and economic reality
(and that representativeness will not be restored) immediately
after (i) 31 December 2021, in the case of all sterling, euro,
Japanese yen and Swiss franc settings, and certain U.S. dollar
settings, or (ii) 30 June 2023, in the case of the remaining U.S.
dollar settings. As a result regulators, including the FCA, have
continued to urge market participants to take active steps to
implement the transition to the Sterling Over Night Index Average
("SONIA") and other risk-free rates ahead of the applicable LIBOR
cessation date. 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";
(f) the statement of the FCA entitled "Transition from LIBOR" dated 4 September 2019;
(g) the open letter from The Investment Association to issuers
entitled "INVESTORS CALL ON COMPANIES TO TAKE URGENT ACTION AND
TRANSITION THEIR LIBOR-LINKED BONDS" dated 3 February 2021; and
(h) the statement of the FCA entitled "FCA announcement on future cessation and loss of representativeness of the LIBOR benchmarks" dated 5 March 2021,
of which (a) to (f) and (h) of the above is available from the
website of the FCA at www.fca.org.uk and (g) is available at
https://www.theia.org/media/press-releases/investors-call-companies-take-urgent-action-and-transition-their-libor-linked
.
Proposed Base Rate Modification
6. The Issuer intends to amend (by amending or amending and
restating or supplementing or replacing such documents):
(a) the Conditions;
(b) the Trust Deed;
(c) the Mortgage Sale Agreement;
(d) the Agency Agreement;
(e) the Administration Agreement;
(f) the Substitute Administrator Agreement;
(g) the Substitute Administrator Facilitator Agreement;
(h) the Deed Poll;
(i) the Issue Services Fee Letter; and
(j) the PM25 Swap Confirmations,
(together, the "Documents") in order:
(a) to remove references to "LIBOR";
(b) to change the Reference Screen in relation to the Notes to
refer to a "SONIA"-based rate;
(c) to change the interest rate calculation provisions to refer to a "SONIA"-based rate;
(d) in relation to the PM25 Swap Confirmations, to (i) change
the "Floating Rate Option" from a "LIBOR"-based rate to a
"SONIA"-based rate and (ii) reduce the Fixed Rate by 0.102%;
and
(e) to make such other amendments as are necessary or advisable
in the reasonable judgment of the Issuer to facilitate such
change,
such amendments, together with all amendments made to the
Documents by the Supplemental Trust Deed and the Amendment Deed
(each as defined below), the "Proposed Base Rate Modification".
In order to effect the Proposed Base Rate Modification, the
Issuer intends to execute:
(a) a supplemental trust deed amending the Trust Deed and the
Conditions (the "Supplemental Trust Deed"); and
(b) a deed of amendment amending the other Documents (the "Amendment Deed").
The draft Supplemental Trust Deed and Amendment Deed are
available for viewing on the date of this Notice at the following
link:
https://investorreporting.paragonbankinggroup.co.uk/bondinvestor_viewer/bondinvestor/investorreporting/paragon_group/bondinvestor_pm25/PM25_Libor_Transition_to_SONIA.
Once executed, the Supplemental Trust Deed and the Amendment Deed
will be available for viewing at the above link.
For the avoidance of doubt, no amendments are being made other
than those that the Issuer, in its reasonable judgment, considers
to be necessary or advisable to implement the Proposed Base Rate
Modification.
7. Further to announcements by the European Money Markets
Institute, as administrator of EONIA, that (i) the EONIA benchmark
will be discontinued from 3 January 2022 and (ii) EONIA users
should accelerate their transition to EURSTR, the Issuer intends to
amend references to "EONIA" in the Approved Credit Support Document
and replace them with an "EURSTR" based rate (the "EONIA
Amendments"). As a result, the Issuer has additionally requested
that the Trustee consent to the EONIA Amendments. Blackline
documents illustrating the Proposed Base Rate Modification (save
for the amendments to the PM25 Swap Confirmations) and EONIA
Amendments will be available for viewing on the date of this Notice
at the following link:
https://investorreporting.paragonbankinggroup.co.uk/bondinvestor_viewer/bondinvestor/investorreporting/paragon_group/bondinvestor_pm25/PM25_Libor_Transition_to_SONIA.
8. In connection with the Proposed Base Rate Modification, an
adjustment to the Rate of Interest payable by the Issuer on the
Notes of 0.1193 per cent. per annum will be added to reflect the
economic difference between LIBOR and SONIA and to achieve a
comparable total interest rate payable on the Notes following the
Proposed Base Rate Modification becoming effective (the "Margin
Adjustment"). The Margin Adjustment will be added to the applicable
Note Interest Rate Margin for each of the Notes for both the
periods before and after the Step-Up Date as outlined in further
detail in Appendix 1 (Margin Adjustment). The calculation of the
Margin Adjustment accords with the methodology for margin
adjustments contained in ISDA IBORs Fallback Supplement found at
http://assets.isda.org/media/3062e7b4/23aa1658-pdf/ and the IBOR
Fallbacks Technical Notice - Spread Fixing Event for LIBOR
published by Bloomberg at
https://assets.bbhub.io/professional/sites/10/IBOR-Fallbacks-LIBOR-Cessation_Announcement_20210305.pdf
.
9. The proposed amendments to the Documents include
consequential modifications, including but not limited to the
calculations and/or determinations in respect of the Mortgage
Margin Reserve Fund and the Mortgage Rate which are necessary or
advisable in order to facilitate the Proposed Base Rate
Modification in a manner which would permit the operation of the
Relevant Documents in accordance with their terms following the
implementation of the Proposed Base Rate Modification. Further,
each Borrower under a LIBOR-Linked Mortgage or a Non-Reversionary
LIBOR-Linked Mortgage has been notified that the base rate in
respect of each such Mortgage has been changed from LIBOR to term
SONIA with effect from 1 July 2021.
10. The Proposed Base Rate Modification will become effective on
the Implementation Date. The first Interest Payment Date on which
the Rate of Interest will be determined by reference to Compounded
Daily SONIA is the Interest Payment Date falling in May 2022. The
detailed provisions relating to the calculation of Compounded Daily
SONIA are set out in the Supplemental Trust Deed.
11. In addition, the PM25 Swap Confirmations will be amended or
replaced pursuant to the terms of the Amendment Deed to calculate
the amounts received by the Issuer on the basis of Compounded Daily
SONIA. The proposed amendments to or replacement of the PM25 Swap
Confirmations will take effect from the Fixed Rate Payer Payment
Date falling on the Implementation Date.
12. The Rating Agencies have been informed of the Proposed Base
Rate Modification and, as at the date of this Notice, neither 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 Class of the Notes by such Rating
Agency or (b) such Rating Agency placing any Notes on rating watch
negative (or equivalent).
Conditions to Proposed Base Rate Modification
13. It is proposed by the Issuer that the Proposed Base Rate
Modification be made to the Conditions and certain Relevant
Documents as a result of:
(a) a public statement by the supervisor of the administrator of
LIBOR, the FCA, that LIBOR has been or will be permanently or
indefinitely discontinued with effect from a date no later than 6
months after the proposed effective date of the Proposed Base Rate
Modification; and
(b) a public statement by the supervisor of the administrator of
LIBOR, the FCA, that means LIBOR will be prohibited from being used
or that its use is subject to restrictions or adverse consequences
with effect from a date no later than 6 months after the proposed
effective date of the Proposed Base Rate Modification,
each as described in paragraph 5 above.
14. The Proposed Base Rate Modification, therefore, falls within
limbs (4) and (5) of Condition 15(a)(iv).
15. The Alternative Base Rate is a function of the Sterling Over
Night Index Average, which, therefore, satisfies Condition
15(a)(v)(2).
16. Pursuant to the Conditions, the Trustee is only obliged to
concur with the Issuer if the Issuer has certified to the Trustee
in writing that the Sellers or PML as Administrator have agreed to
pay, or to put the Issuer in funds to pay, all fees, costs and
expenses (including legal fees and costs associated with any
amendments to hedging agreements) incurred by the Issuer and the
Trustee or any other party to any Relevant Documents in connection
with the Proposed Base Rate Modification. The Issuer will make such
certification in writing under the Base Rate Modification
Certificate (as defined below).
17. In this Notice:
"Eligible Class A Noteholders" means Noteholders of the Most
Senior Class of Notes outstanding (being the Class A Notes) but
excluding any Class A Noteholder which is Paragon (as defined
below) or any of its Affiliates; and
"Eligible Principal Amount Outstanding" means the Principal
Amount Outstanding less any principal owing to a Class A Noteholder
which is not an Eligible Class A Noteholder.
Unless the Proposed Base Rate Modification is objected to by
Eligible Class A Noteholders representing at least 10 per cent. of
the aggregate Eligible Principal Amount Outstanding in accordance
with this Notice, and provided that the other requirements of
Condition 15 (Base Rate Modification) have otherwise been met, the
Issuer (or PML as Administrator on its behalf) will certify to the
Trustee in writing that the requirements of Condition 15 have been
met (the "Base Rate Modification Certificate"). The Trustee will
then enter into the Amendment Deed and the Supplemental Trust Deed
to effect the Proposed Base Rate Modification (effective from the
Implementation Date) in reliance solely on such Base Rate
Modification Certificate.
18. Pursuant to Condition 15(a) (Base Rate Modification), the
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 Trustee that,
after providing at least 35 calendar days' notice to the
Noteholders of each Class of the Proposed Base Rate Modification in
accordance with Condition 12 (Notices) and Condition 15(c) (Base
Rate Modification) and by publication on Bloomberg on the "Company
News" screen relating to the Notes, Eligible Class A Noteholders
representing at least 10 per cent. of the aggregate Eligible
Principal Amount Outstanding of the Most Senior Class of Notes
outstanding (being the Class A Notes) have not contacted the
Issuer, Tabulation Agent 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 that such
Eligible Class A Noteholders do not consent to the Proposed Base
Rate Modification within not less than 30 calendar days of the date
of this Notice; and
(b) all other conditions set out in Condition 15 (Base Rate
Modification) have been satisfied,
and the Issuer will make such certifications under the Base Rate
Modification Certificate.
19. If objections to the Proposed Base Rate Modification are
received in accordance with the procedures set out in this Notice
from Eligible Class A Noteholders representing at least 10 per
cent. of the aggregate Eligible 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 Base
Rate Modification unless an Extraordinary Resolution of the Class A
Noteholders is subsequently passed approving the Proposed Base Rate
Modification.
20. Pursuant to Condition 15(e)(i) (Base Rate Modification),
when implementing any Proposed Base Rate Modification pursuant to
Condition 15 (Base Rate Modification), the Trustee shall not
consider the interests of the Noteholders, any other Secured
Creditor or any other person and shall act and rely solely and
without further investigation, on any Base Rate Modification
Certificate or evidence provided to it by the Issuer (or PML as
Administrator on behalf of the Issuer) or the relevant Transaction
Party, as the case may be, pursuant to Condition 15 (Base Rate
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.
Procedure for objecting to Proposed Base Rate Modification
21. Only Eligible Class A Noteholders may object to the Proposed
Base Rate Modification. Eligible Class A Noteholders who wish to
notify the Issuer (via the Tabulation Agent) that they object to
the Proposed Base Rate Modification must do so by submitting an
electronic voting instruction in accordance with the procedures set
out by this Notice by 4:00 p.m. (London time) on 19 August 2021
(the "Deadline"). No physical or virtual meeting of the Eligible
Class A Noteholders will be held.
22. NO ACTION IS REQUIRED TO BE TAKEN BY ANY ELIGIBLE CLASS A
NOTEHOLDER WHO DOES NOT WISH TO OBJECT TO THE PROPOSED BASE RATE
MODIFICATION.
23. Each Eligible 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 (as defined below) will receive
the voting instructions of that Eligible 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 Noteholder 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 Noteholder at any time after such
date until the Deadline. Votes will only apply to the Eligible
Principal Amount Outstanding of Class A Notes held by Eligible
Class A Noteholders then outstanding blocked in the relevant
clearing system.
24. 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. Eligible Class A
Noteholders should note that clearing system deadlines for the
submission of voting instructions may be different from the
Deadline set out herein, and as such Eligible Class A Noteholders
who wish to object should check the relevant clearing system's
procedures and deadlines ahead of the Deadline.
25. 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.
26. Each Eligible 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 voting instruction must have an
individual matching blocking instruction.
27. By providing electronic voting instructions as described
above, each beneficial owner of the Class A Notes authorises the
clearing systems at which its account is maintained to disclose to
the Tabulation Agent, the Principal Paying Agent, the 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.
28. Following expiry of the Deadline, the Tabulation Agent will
calculate the number of objection instructions received and notify
the Issuer and the Trustee. If "Reject" votes are received in
accordance with the procedures set out in this Notice from Eligible
Class A Noteholders representing at least 10 per cent. of the
aggregate Eligible Principal Amount Outstanding of the Class A
Notes then outstanding by the Deadline, the Issuer will not be
entitled to enter into the Proposed Base Rate Modification unless
an Extraordinary Resolution of the Class A Notes then outstanding
is subsequently passed approving the Proposed Base Rate
Modification. If the 10 per cent. threshold is not reached, the
Issuer, the Trustee and the other parties to the Amendment Deed and
the Supplemental Trust Deed will (subject to the satisfaction of
the other requirements of Condition 15 (Base Rate Modification))
enter into the Amendment Deed and the Supplemental Trust Deed which
will each have effect (except to the extent set out in the
Amendment Deed or the Supplemental Trust Deed, as applicable) on
and from the Implementation Date and Noteholders will be bound by
such Proposed Base Rate Modification. Votes delivered in favour of
the Proposed Base Rate Modification will not be counted.
29. Additional notifications will be made to Noteholders in
accordance with Condition 12 (Notices) as soon as reasonably
practicable following:
(a) the Deadline, notifying Noteholders of the voting results;
(b) the entry into the Amendment Deed and the Supplemental Trust Deed on the Amendment Date.
30. Eligible 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") or
(ii) the delivery of instructions for the Class A Notes, are
requested to contact Citibank, N.A. (the "Tabulation Agent") using
the details set out below.
Contact Details:
Issuer:
PARAGON MORTGAGES (NO.25) PLC
51 Homer Road
Solihull
West Midlands B91 3QJ
Email: securitisations@paragonbank.co.uk
Attention: The Directors
With a copy to:
PARAGON BANK PLC ("Paragon")
51 Homer Road
Solihull
West Midlands, B91 3QJ
Email: securitisations@paragonbank.co.uk
Attention: The Directors
Solicitation Agent:
LLOYDS BANK CORPORATE MARKETS PLC
25 Gresham Street
London EC2V 7HN
Tel: + 44 (0) 20 7158 1719/2720
Email: liability.management@lloydsbanking.com
Attention: Liability Management Team
Tabulation Agent:
CITIBANK, N.A.
Citigroup Centre
Canada Square
London E14 5LB
Tel: +44 (0)20 7508 3867
Attention: Exchange Team
Email: citiexchanges@citi.com
31. Further details regarding the timetable for implementing the
Proposed Base Rate Modification are available at Annex 3 (Proposed
Timetable).
Additional information and disclaimers
32. 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 Trustee
or the Agents (or their respective affiliates, directors,
employees, officers, consultants or agents) accepts any
responsibility for the information contained in this Notice.
33. None of the 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. None of the Trustee, the
Solicitation Agent, the Tabulation Agent or the Agents (or their
respective affiliates, directors, employees, officers, consultants
or agents) is responsible for the accuracy, completeness, validity
or correctness of the statements made in this Notice or omissions
therefrom.
34. None of the 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 Amendment Deed 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.
35. No person has been authorised to make any recommendation on
behalf of the Issuer, the 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
Trustee, the Solicitation Agent, the Tabulation Agent or the Agents
(or their respective affiliates, directors, employees, officers,
consultants or agents).
36. 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. This Notice is not issued to nor directed at the
Residual Certificateholders. The Residual Certificateholders are
not entitled to act on this Notice and this Notice is given to them
for their information purposes only.
37. The Solicitation Agent is entitled to have or hold positions
in the Notes either for its 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. No such submission or nonsubmission by
the Solicitation Agent, the Issuer, the Administrators or their
affiliates should be taken by any Noteholder or any other person as
any recommendation or otherwise by any of the Issuer, the
Solicitation Agent, the Administrators or their affiliates, as the
case may be, or any other person as to the merits of objecting or
not objecting to the Proposed Base Rate Modification.
38. Each person receiving this Notice is deemed to acknowledge
that such person has not relied on the Issuer, the Trustee, the
Solicitation Agent, the Tabulation Agent, the Agents or any other
party to the Relevant Documents in connection with its decision on
how to vote in relation to the Proposed Base Rate Modification.
Each such person must make its own analysis and investigation
regarding the Proposed Base Rate Modification, the Supplemental
Trust Deed and the Amendment Deed 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
Supplemental Trust Deed and the Amendment Deed 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
PARAGON MORTGAGES (NO.25) LIMITED
as Issuer
Dated 19 July 2021
APPIX 1
MARGIN ADJUSTMENT
If the Proposed Base Rate Modification takes effect on the
Implementation Date, the Issuer shall, beginning on the Interest
Payment Date falling in May 2022, pay the following Rates of
Interest on each class of Notes:
Note Original Initial Note Interest Note Interest Margin Margin Margin
class rating amount Rate Margin Rate Margin Adjustment (prior (on and
(Fitch (GBP) (prior to (on and (% p/a) to the after
/ Moody's) the Step-Up after the Step-Up the Step-Up
Date) (% Step-Up Date) Date)
p/a) Date) (% (% p/a) (% p/a)
p/a)
A AAA / aaa 600,000,000 0.650 0.975 0.1193 0.7693 1.0943
------------- ------------ -------------- -------------- ------------ --------- -------------
B AA / Aa1 33,500,000 0.950 1.425 0.1193 1.0693 1.5443
------------- ------------ -------------- -------------- ------------ --------- -------------
C A- / A1 30,000,000 1.300 1.950 0.1193 1.4193 2.0693
------------- ------------ -------------- -------------- ------------ --------- -------------
BBB- /
D Baa1 24,700,000 1.600 2.400 0.1193 1.7193 2.5193
------------- ------------ -------------- -------------- ------------ --------- -------------
Z Not rated 17,648,000 2.600 2.600 0.1193 2.7193 2.7193
------------- ------------ -------------- -------------- ------------ --------- -------------
S Not rated 10,923,000 4.000 4.000 0.1193 4.1193 4.1193
------------- ------------ -------------- -------------- ------------ --------- -------------
SVFN Not rated 7,952,955 4.000 4.000 0.1193 4.1193 4.1193
------------- ------------ -------------- -------------- ------------ --------- -------------
APPIX 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,
Paragon, the Solicitation Agent, the Agents, the Trustee or the
Tabulation Agent assumes any responsibility for informing
Noteholders of irregularities with respect to instructions.
Responsibility to Consult Advisers.
Noteholders should consult their own tax, accounting, financial
and legal advisers regarding the consequences (tax, accounting or
otherwise) of submitting instruction and regarding the impact on
them of the implementation of the Proposed Base Rate
Modification.
None of the Issuer, Paragon, the Solicitation Agent, the Agents,
the Trustee or the Tabulation Agent, nor any director, officer,
employee, agent or affiliate of any such person, is acting for any
Noteholder, or will be responsible to any Noteholder for providing
any protections which would be afforded to its clients or for
providing advice in relation to submitting instructions or the
Proposed Base Rate Modification, and accordingly none of the
Issuer, Paragon, the Solicitation Agent, the Agents, the Trustee or
the Tabulation Agent, nor any director, officer, employee, agent or
affiliate of, any such person makes any recommendation whether
Noteholders should submit instructions in respect of the Proposed
Base Rate Modification.
The market continues to develop in relation to SONIA as a
reference rate for floating rate notes.
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, investors should be aware that LIBOR and SONIA may behave
materially differently as interest reference rates for the
Notes.
Investors should be aware that the market continues to develop
in relation to SONIA as 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 proposed under the Proposed Base
Rate Modification. Equally it may be difficult for the Issuer, if
required, to find any future replacement interest rate swap
provider or for the Issuer, if required, to find any future
replacement issuer swap provider to appropriately hedge either the
exposure to variance in interest rate in the Mortgage Portfolio or
interest rate exposure on any Notes (as applicable) determined by
reference to compounded daily SONIA should a relevant swap provider
need to be replaced and where available swap providers at such time
are not prepared to hedge products determined by reference to a
compounded daily SONIA. Interest on 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 Interest
Payment Date. It may be difficult for investors in Notes which
reference a SONIA rate to reliably estimate the amount of interest
which will be payable on such Notes and some investors may be
unwilling or unable to trade such Notes without making changes to
their IT systems, both of which factors could adversely affect the
liquidity of such Notes.
In addition, it should be noted that broadly divergent interest
rate calculation methodologies may develop and apply as between the
Loan, the Notes and/or any interest rate swap transactions
conducted by the Issuer from time to time due to different market
conventions, variations in applicable fall-back provisions or other
matters and the effects of this are uncertain but could include a
reduction in the amounts available to the Issuer to meet its
payment obligations in respect of the notes. Furthermore, changes
to SONIA may adversely affect the operation of the Initial Basis
Hedge Agreement.
Changes or uncertainty in respect of SONIA may affect the value,
liquidity and payment of interest under the Notes
Interest rates and other indices which are deemed to be
"benchmarks", including SONIA, are the subject of recent national,
international and other regulatory reforms and proposals for
reform. Some of these reforms are already effective whilst others
are still to be implemented. These reforms may cause such
benchmarks to perform differently than in the past, to disappear
entirely, or have other consequences which cannot be predicted. Any
such consequence could have a material adverse effect on any Notes
referencing such a benchmark, including possible adverse tax
consequences for certain Noteholders.
Regulation (EU) No. 2016/1011 (as amended or superseded) (the
"EU Benchmarks Regulations") applies from 1 January 2018 in
general, subject to certain transitional provisions. Certain
requirements of the EU Benchmarks Regulation apply with respect to
the provision of a wide range of benchmarks (including SONIA), the
contribution of input data to a benchmark and the use of a
benchmark within the EU. In particular, the EU Benchmarks
Regulation, among other things, (i) requires benchmark
administrators to be authorised or registered (or, if non-EU based,
to be subject to an equivalent regime or otherwise recognised or
endorsed) and to comply with extensive requirements in relation to
the administration of benchmarks and (ii) prevents certain uses by
EU-supervised entities of benchmarks of administrators that are not
authorised or registered (or, if non-EU-based, deemed equivalent or
recognised or endorsed). The UK Benchmarks Regulation (as it forms
part of domestic law by virtue of the European Union (Withdrawal)
Act 2018) (the "UK Benchmark Regulation") among other things,
applies to the provision of benchmarks and the use of a benchmark
in the U.K. Similarly, it prohibits the use in the U.K. by U.K.
supervised entities of benchmarks of administrators that are not
authorised by the FCA or registered on the FCA register (or, if
non-U.K. based, not deemed equivalent or recognised or endorsed).
The administrators of SONIA are not currently required to obtain
authorisation/registration and SONIA does not fall within the scope
of the EU Benchmarks Regulation or the UK Benchmarks Regulation by
virtue of Article 2 of each of these regulations.
The EU Benchmarks Regulation and/or the UK Benchmarks
Regulation, as applicable, could have a material impact on any
Notes linked to or referencing a benchmark in particular, if the
methodology or other terms of the benchmark are changed in order to
comply with the requirements of the EU Benchmarks Regulation and/or
the UK Benchmarks Regulation, as applicable. Such changes could,
among other things, have the effect of reducing, increasing or
otherwise affecting the volatility of the published rate or level
of the relevant benchmark. More broadly, any of the international
or national reforms, or the general increased regulatory scrutiny
of benchmarks, could increase the costs and risks of administering
or otherwise participating in the setting of a benchmark and
complying with any such regulations or requirements.
These reforms and other pressures may cause SONIA to disappear
entirely, to perform differently than in the past (as a result of a
change in methodology or otherwise), create disincentives for
market participants to continue to administer or participate in
certain benchmarks or have other consequences which cannot be
predicted. Such factors may have (without limitation) the following
effects on certain benchmarks: (i) discouraging market participants
from continuing to administer or contribute to a benchmark; (ii)
triggering changes in the rules or methodologies used in the
benchmark and/or (iii) leading to the disappearance of the
benchmark. Any of the above changes or any other consequential
changes as a result of international or national reforms or other
initiatives or investigations could have a material adverse effect
on the value of and return on the Notes.
More generally, any of the above matters or any other
significant change to the setting or existence of SONIA could
affect the ability of the Issuer to meet its obligations under the
Notes and/or could have a material adverse effect on the value or
liquidity of, and the amount payable under, the Notes. No assurance
may be provided that relevant changes will not be made to SONIA or
any other relevant benchmark rate and/or that such benchmarks will
continue to exist.
Investors should consult their own independent advisers and make
their own assessment about the potential risks imposed by the EU
Benchmarks Regulation and/or the UK Benchmarks Regulation, as
applicable, or any of the international or national reforms and the
possible application of the benchmark replacement provisions of the
Notes in making any investment decision with respect to the
Notes.
No assurance that the Proposed Base Rate Modification will be
implemented
Until the Amendment Deed is executed and the requirements of
Condition 15 (Base Rate Modification) are met, no assurance can be
given that the Proposed Base Rate Modification will be implemented
in respect of the Notes.
All Noteholders are bound by the Proposed Base Rate
Modification
Noteholders should note that if the Proposed Base Rate
Modification takes effect it will be binding on all Noteholders,
whether or not they chose to, or are able to, submit
instructions.
ANNEX 3
PROPOSED TIMETABLE
Date Step
9 July 2021 Draft Base Rate Modification Certificate delivered
to the Trustee.
---------------------------------------------------
19 July 2021 This Notice given to Noteholders.
---------------------------------------------------
19 August At 4:00 p.m. London time, deadline for Eligible
2021 Class A Noteholders to object to the Proposed
Base Rate Modification in accordance with
this Notice.
---------------------------------------------------
20 August Results notice to be delivered to Noteholders
2021 advising on the outcome of the negative consent
process pursuant to this Notice.
---------------------------------------------------
23 August Signed Base Rate Modification Certificate
2021 delivered to the Trustee.
Amendment Deed and Supplemental Trust Deed
signed by the parties thereto.
---------------------------------------------------
15 February The Proposed Base Rate Modification takes
2022 effect.
---------------------------------------------------
16 May 2022 The first Interest Payment Date on which the
Rate of Interest will be determined by reference
to SONIA rather than LIBOR.
---------------------------------------------------
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END
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