TIDM52RS
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.
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.
UK MiFIR professionals/ECPs-only - Manufacturer target market
(UK MiFIR product governance) is eligible counterparties and
professional clients only (all distribution channels). No PRIIPs
key information document (KID) has been prepared as the Notes
referred to in this Notice are not available to retail investors in
the EEA or in the UK.
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.
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.
If you have recently sold or otherwise transferred your entire
holding(s) of Notes referred to below, you should immediately
forward this document to the purchaser or transferee or to the
stockbroker, bank or other agent through whom the sale or transfer
was effected for transmission to the purchaser or transferee.
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")
GBP409,935,000 (current amount outstanding GBP254,506,101) Class
A2 Mortgage Backed Floating Rate Notes due 2060
Reg S ISIN: XS1863917057; Rule 144A ISIN: XS1863917131
(the "Class A2 Notes")
GBP441,684,000 (current amount outstanding GBP441,684,000) Class
A3 Mortgage Backed Floating Rate Notes due 2060
Reg S ISIN: XS1863917214; Rule 144A ISIN: XS1863917305
(the "Class A3 Notes")
GBP49,956,000 (current amount outstanding GBP49,956,000) Class M
Mortgage Backed Floating Rate Notes due 2060
Reg S ISIN: XS1863917644; Rule 144A ISIN: XS1863917727
(the "Class M Notes")
GBP99,911,000 (current amount outstanding GBP99,911,000) 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:
Issuer:
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
Solicitation Agent:
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
Tabulation Agent:
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
GOSFORTH FUNDING 2018--1 PLC
as Issuer
Dated 22 January 2021
APPIX 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$557,895,000 Class A1 Mortgage Backed Floating Rate Notes due
2060
Reg S ISIN: XS1863916679; Rule 144A ISIN: US38312RAA14; CUSIP:
38312R AA1
(the "Class A1 Notes")
OBJECTION NOTICE
On 22 January 2021 Gosforth Funding 2018-1 announced that it
intends to amend the rate of interest applicable to its
GBP409,935,000 Class A2 Mortgage Backed Floating Rate Notes due
2060, GBP441,684,000 Class A3 Mortgage Backed Floating Rate Notes
due 2060 and GBP49,956,000 Class M Mortgage Backed Floating Rate
Notes due 2060 from a "LIBOR"--based rate to a "SONIA"--based rate
and to make certain other amendments with effect from 25 February
2021 (the "Proposed Base Rate Modification").
FOR USE IN CONNECTION WITH THE NOTICE OF BASE RATE MODIFICATION
ISSUED BY GOSFORTH FUNDING 2018-1 PLC DATED 22 JANUARY 2021
( To be complet ed by a DTC Direct Part ici pant only)
This Objection Notice should be completed and signed by a duly
appointed attorney or a duly authorised officer of the direct
participant of DTC (the "DTC Direct Participant") who was the
holder of certain Class A1 Notes as of 19 February 2021 (the
"Record Date") and who is named in the omnibus proxy (the "Omnibus
Proxy") that was issued by DTC on the Record Date and lodged with
Lucid Issuer Services Limited (the "Tabulation Agent"), acting in
its capacity as tabulation agent in respect of the Transaction, by
sending a PDF version of this Objection Notice by e--mail to
virginmoney@lucid-is.com not later than 4.00 p.m. (London time)/
11.00 a.m. (New York time) on 22 February 2021 (the "Deadline") in
order to reject the Proposed Base Rate Modification.
We hereby certify to you that:
On date of this Objection Notice and also on the Record Date, we
are a holder of the Class A1 Notes with an aggregate principal
amount of US$ _____________ 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.
N o other per son has been appoi n ted in respect of the above
Class A1 Notes and no voting or consent i nst ruc tions have been g
i ven in r e lat ion to such Class A1 Notes.
C api talised t e r ms used but not def ined in this Objection
Notice sha ll have the meanings g i ven to t hem in t he Noti ce of
Base Rate Modification in respect of the N o t es da ted 22 January
2021.
..............................................................................................
Si gned by a duly aut hor ised of f i cer on beha lf of the D TC
Direct Pa r t i c ipant
N ame of D TC Direct Par t icipan t:
...............................................................................
D ate:
...........................................
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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END
MSCKZGZMZZKGMZM
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January 22, 2021 07:57 ET (12:57 GMT)
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