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A&O advises on new risk free rate loan facility for Tesco plc

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Greg Brown



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Dominique Crowley
Dominique Crowley

Senior Associate


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14 October 2020

Allen & Overy has advised BNP Paribas (as Sole Coordinator and Sustainability Coordinator) and NatWest (as Risk Free Rate (RFR) Manager and Facility Agent) to successfully finance a new GBP2.5 billion multi-currency three-year RFR syndicated loan facility for Tesco plc.

This is the first syndicated facility agreement that references both the Sterling Overnight Index Average (SONIA) and the Secured Overnight Financing Rate (SOFR) from the signing date. The two previous RFR syndicated facility agreements, for Royal Dutch Shell plc and British American Tobacco, each referenced LIBOR on the signing date and contained a mechanism to switch to the RFRs during the life of the facility agreement. 

It is also the world’s first syndicated RFR facility agreement that provides a choice of interest periods and – reflecting the continued market appetite for environmental, social and governance (ESG) performance-based lending – also contains a sustainability-linked margin ratchet that adjusts according to the company’s performance against a number of ESG performance indicators.

This is the third publicly announced syndicated facility to reference RFRs, the first two being for Royal Dutch Shell plc and British American Tobacco plc, and follows the recent series of bilateral RFR facility agreements for GlaxoSmithKline plc. A&O has advised the lenders on each of these transactions.

Greg Brown, an Allen & Overy banking partner in London, commented: “This is the kind of deal for which Allen & Overy has built a well-deserved reputation, and I am pleased that we have been able to use the benefit of our recent experience to arrange this unique facility for Tesco. We are looking forward to working with clients in the coming months to continue developing first-of-a-kind solutions as the market transitions away from LIBOR.”

The Allen & Overy team in London was led by partner Greg Brown, supported by associate Dominique Crowley.