TRAINING

SONIA transition is coming and implementation now needs to be prioritised.  Even if you only have one LIBOR loan you will be affected by this change. 

SONIA will replace LIBOR as the main reference rate for loans by the end of 2021.  SONIA was chosen because it truly reflects real market interest rates but it is calculated compounded daily in arrears to more accurately reflect the time value of money.   We will all have to start getting used to calculating daily compounded-in-arrears interest.  

The final deadline of 31 December 2021 is now confirmed and the Bank of England and the Financial Conduct Authority are encouraging everyone to start the transition sooner rather than later.   2TIX LTD has been closely tracking the progress of SONIA transition and can support your organisation understand the complexities and help you implement this change.

SONIA is published by the Bank of England every day but daily-compounding-in-arrears is quite tricky without access to a special calculator.  Abovo-Consult and 2TIX LTD have developed a unique Loan Portfolio Calculator for accrued Interest.

Click the image to download the demo SONIA calculator (BETA).

A more sophisticated version to calculate accrued interest on a portfolio of loans is available from - admin@2tix.ltd .  Click here to find out more

Whether you need support for a new SONIA loan, or conversion of an existing loan from LIBOR to SONIA, we can help. In addition to helping you understand the technical complexities, we can assist your treasury team prepare for the practical changes:

• We can help you develop your own Decision Matrix – if you are offered a choice between Compounded SONIA Index or Bank Rate;
• We offer practical support on system and process changes;
• We can provide you with a ready-made plan and implementation timetable then help you manage the transition;
• We can help you review your side letters and other transition documentation;
• We offer Adjustment Spread advice – based on the standard historical 5-year median;
• We can help you calculate interest on a Compound SONIA Index basis;
• We can support lender negotiation – on technicalities specific to you;
• We can support the fair calculation of fixed Rate Break costs – changes to documentation and calculations; and
• We offer advice on changes to financial covenants where necessary to reflect the principle of no gain / no loss.

We can help you implement the effect of this change on your business planning: 

• We offer a SONIA Forecast Interest Rate for the next 2 years; and
• We can show you how to account for the adjustment spread in business plan cash flows.

Over the next few months we will be sending out a regular Best Practice newsletter to keep you up to date about progress towards SONIA Transition. Written in plain English it will help you learn the new terminology and gain an inside track on emerging issues 

The transition to SONIA is going to absorb valuable time. We offer a variety of training services to help make your life easier:

• Your treasury team is going to need technical training on how SONIA works, the calculation of accrued interest on a Compounded in arrears basis and the ISDA Protocol. They will need to be able to work out the Adjustment spread, the new daily Compounded SONIA Index and new processes and timescales for checking and calculating loan interest depending on the observational shift / Lag. 
• Your Board and executive team will be interested to learn about this new interest rate and will look for reassurance that this is primarily a process change rather than a new risk. They are also going to need to understand the transition process and the part they will play in signing off the change. 

In addition to training we can offer support in many ways including telephone support for ad-hoc queries. For formal settings we offer a video meeting (or Board attendance when possible). We can provide you with ready-made Board papers / committee papers explaining the issues and the necessary paperwork. If you prefer to present this change to your Board yourself we can offer a pack of ready-made slides.  

 In the section below  you can download worked examples and a Glossary of the new jargon.