The Infrastructure Projects Authority (“IPA”) recently published guidance on LIBOR transition and key considerations for both UK PFI/PPP contractors and their financiers in respect of active LIBOR transition. Whilst this guidance is welcomed, we believe further guidance from the public sector on a number of key considerations would be helpful to promote a uniform approach to, and orderly transition from, LIBOR transition for UK PFI/PPP projects. Since the guidance was published, the Financial Conduct Authority (“FCA”) published (on Friday 5 March 2021) a statement announcing the dates of the future cessation or loss of representativeness of all 35 LIBOR settings currently published by ICE Benchmark Administration Limited (“IBA”).  These LIBOR settings will be referenced in many commercial loans entered into as part of UK PFI/PPP projects. The FCA will consult on requiring IBA to continue publishing one-month, three-month and six-month sterling LIBOR on a non-representative, synthetic basis for a further period after the end of 2021. There will be uncertainty surrounding these synthetic sterling LIBOR until this consultation process has been concluded, so we expect lenders to be proactive with the management of their loan books in light of FCA’s statement. We have pioneered technology-based solutions to help with your organisation’s LIBOR transition with BCLP’s three-stage approach of Audit, Analyse and Execute – find out more here. This suggested approach to your LIBOR-linked credit positions can equally apply to non-PPP/PFI infrastructure LIBOR credits.

The UK’s Infrastructure Project Authority’s (IPA’s) guidance recent note (effective immediately and until at least 30 June 2020) on COVID-19 for PFI/PF2 contractors emphasises an intention by the public sector to, to the extent possible, ensure service provision (and unitary charge payment) continuity.  The guidance also makes it clear that the public sector does not view COVID-19 as a force majeure event. Whilst this is likely to be the case (based on this guidance in this specific context), we nevertheless recommend  that PFI/PF2 contractors, practising prudent and active asset management, review the precise drafting of the force majeure drafting in their contracts (and any other related relief, “excusing cause” or public emergency drafting), including in respect of pass-down to sub-contracts.