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  • Asteros Advisers

Has your PFI provider asked for consent to switch to SONIA?

If you have PFI contracts and you're unsure of the risks and impact of this change and would like specialist advice and assurance to support you, then please contact us. This is an issue that will need to be resolved before the 31st of December 2021. We are a leading specialist infrastructure financial advisory business with considerable experience of supporting local authorities and providing assurance on complex financial issues. Please either reply directly to this email ( or press the button below and provide your details and we'll get in touch with you. Contact us

The London Interbank Offered Rate (LIBOR) that has widely been used in Private Finance Initiative (PFI) contracts as the floating interest reference rate will no longer be available after 31st December 2021. LIBOR is being replaced by the Sterling Overnight Index Average (SONIA). Whilst this is a regulatory change and should not impact your PFI Unitary Charge, your PFI provider is likely to require your consent in order to amend the reference rate from LIBOR to SONIA. You have exposure to risk within the PFI contract and we feel it's important you receive independent advice to explain the change, its impact and the underlying risks, to assist you in the process of providing consent.

Risks to consider Complying with guidance The Infrastructure & Projects Authority (IPA) is providing guidance on how the transition should be dealt with. Complying with best practice and ensuring that you only provide the specific consent without accepting or taking additional risks is a critical part of the process. Interest rate SWAPS The switch to LIBOR impacts the floating interest element of the SWAP that is used in a PFI transaction to price the fixed interest rate. Whilst the Unitary Charge may remain unchanged the underlying valuation of the SWAP can be affected. Credit Adjustment Spread (CAS) The choice of methodology used to calculate CAS is at the discretion of the counterparties - typically this is either a historical median difference between LIBOR or SONIA or a forward-looking difference. We can help evaluate the impact that different approaches have. Termination liability Since SONIA is a near risk-free rate it will typically be lower than LIBOR which contains an element of bank credit risk. The impact of potentially higher breakage costs arising from the switch should be considered in relation to your termination liability.

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