Certain benchmarks in common usage in European debt financing transactions, for example, CHF LIBOR, STIBOR, CIBOR and EONIA have been in negative territory for some time. More recently the impact of negative rates has become more significant and widespread as Euribor and euro LIBOR rates (sub-three month maturities) have dipped below zero and pre-existing negative rates have fallen further.
Slaughter and May have published a useful financing paper on the impact of negative rates under loan, bond and swap terms for corporates. This summarises how negative benchmark rates might affect payments under typical LMA, floating rate note and ISDA terms. It also considers the steps borrowers and issuers are currently taking to retain the economic benefit of negative rates.
A copy of the paper can be found in the file below.