Royal Dutch Shell on Friday announced it has signed a $10 billion revolving credit facility (RCF) to replace its existing $8.84 billion facility. Notable in the change is the transition from operating under LIBOR, set to expire at the end of 2021, to the Secured Overnight Financing Rate (SOFR).
Shell has branded the new RCF as “one of the world’s first credit facilities linked to” SOFR, which was selected as the preferred alternative to LIBOR by the Fed-formed Alternative Reference Rates Committee in June 2017. Under the terms of the Shell deal, the LIBOR interest rate will be replaced by SOFR as early as the first anniversary of the signing date of the RCF, once the bank market is fully prepared for SOFR as an underlying rate.
“Transactions such as this play a crucial role in establishing conventions that can be widely adopted across the market, and Shell has demonstrated real leadership by engaging with banks to demonstrate a path to a post-LIBOR world.”
Tushar Morzaria, Chair, Sterling Risk Free Reference Rates Working Group
“I am delighted that Shell has been able to develop a practical solution for the transition to SOFR,” said Tushar Morzaria, group finance director at Barclays and chair of the Sterling Risk Free Reference Rates Working Group, in an emailed statement….