London—Dentons has advised Principality Building Society, the UK's sixth largest building society, and Atom Bank PLC, the UK's first app-based bank, in relation to switching their RMBS securitisations to SONIA from LIBOR.

The transactions, as further described below, were undertaken in response to statements issued by the FCA, BoE and the Working Group on Risk Free Rates endorsing the switch from LIBOR to SONIA via active and voluntary exercises and encouraging early initiative by market participants. 

Peter Voisey, partner and co-head of Dentons' UK Securitisation and Structured Finance practice, who led on the transactions, said, "We are delighted to have advised both Principality Building Society and Atom Bank on these transactions. Our finance practice is at the forefront of advising clients on LIBOR discontinuation across many different sectors of the loan markets, derivatives and debt capital markets, and on all aspects of that process, from developing new SONIA-based products to repapering legacy LIBOR portfolios. In the context of debt capital markets and securitisation, our substantial liability management experience, combined with our product expertise in debt capital markets and securitisation, means our clients can access multiple sources of experience within our deal teams to ensure best execution". 

Victoria Wyer, senior associate in Dentons' Capital Markets practice in London who advised on the transactions, said, "We were pleased to assist two well-known issuers of prime RMBS on their successful LIBOR/SONIA transitions and we look forward to continuing to support our clients on the transition from LIBOR to SONIA."

Ben Balmer, Deputy Head of Treasury at Atom Bank, said, "It was good to work with the experienced Dentons team again on the successful execution of the Elvet 2018-1 negative consent process. Proactive migration from LIBOR to SONIA is important for market development, working with trusted advisors was greatly beneficial in navigating through the inherent complexities of the transaction."

Principality Building Society successfully completed a consent solicitation process, where the issuer, Friary No 4 PLC, invited holders of its Class A Notes to consent to the modification of the terms and conditions of the notes and consequential or related amendments to the transaction documents such that the existing 3-month LIBOR benchmark used to calculated the rates payable was replaced by Compounded Daily SONIA. Noteholder consent was successfully achieved at the initial Noteholder Meeting (which was held virtually due to restrictions relating to the COVID-19 pandemic). Related amendments to the Class B Notes were made by way of a noteholder written resolution. 

Atom Bank successfully completed a negative consent process in relation to the Elvet Mortgages 2018-1 PLC Class A Notes and Class Z Notes. The transaction was undertaken in accordance with the Association for Financial Markets in Europe (AFME) recommended Base Rate Modification provisions set out in the terms and conditions of the notes and enabled Atom Bank to successfully transition the benchmark for the Notes from LIBOR to SONIA and to amend the terms of the relevant transaction documents accordingly. In line with the AFME provisions, Atom Bank was able to proceed without express noteholder consent on the basis that sufficient notice was provided to noteholders of the intention to transition the Notes from LIBOR to SONIA and that less than 10% of noteholders objected to the proposed amendments.

Alongside Peter Voisey, the Dentons team included Banking and Finance partner Matthew Sapte, Senior Associate Victoria Wyer, and associates Niharika Khimji, Annreika Ray, Jakub Telicka and Yip Sum Wu.

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