3-Month ICE Term SONIA

From 8 October 2022, 3-Month ICE Term SONIA is the benchmark used for loans denominated in sterling and finalised after 30 July 2017 and prior to 1 January 2022. If you have multiple loans originated by Prodigy Finance, your loans may track different benchmarks, depending on when they were finalised and the currency of the loan.

We adjust the variable interest rate quarterly on 8 January, 8 April, 8 July and 8 October tracking the 3-Month ICE Term SONIA rate available at the end of the previous business day. If the 3-Month rate ICE Term SONIA is less than zero percent, then the benchmark will be zero percent for purposes of calculating the interest rate.

Transition from 3-Month Term USD Libor to 3-Month ICE Term SONIA

On 8 October 2022, the benchmark rate of all sterling loans originated by Prodigy Finance during the period from 30 July 2017 to 21 December 2021 changed from 3-Month Term USD Libor to 3-Month ICE Term SONIA. The benchmark rate of all sterling loans originated by Prodigy Finance before 30 July 2017 may be changed from 3-Month Term USD Libor to 3-Month ICE Term SONIA at a later stage and we will contact all affected customer ahead of time.

Why did we change the Base Rate?

In 2017, the Bank of England and the Financial Conduct Authority (“FCA”) expressed concern that LIBOR was becoming less representative of the underlying market, and consequently announced that LIBOR was to cease at the end of 2021. To avoid disruption to existing agreements where the applicable base rate was linked to LIBOR, the FCA provided for an alternative synthetic 3-month sterling LIBOR rate to be published as a temporary replacement. We applied the alternative synthetic 3-month sterling LIBOR rate to all our sterling denominated loans from 4 January 2022.

However, the alternative synthetic 3-month sterling LIBOR rate is also in the process of being phased out by the FCA, therefore we need to change the Base Rate on our loans which are linked to the synthetic 3-month sterling LIBOR rate, to a replacement reference rate. The replacement rate we have selected is 3-month ICE Term SONIA. SONIA is based on the Sterling Overnight Index Average reference rate, which is administered and published by the Bank of England. It was selected as the preferred alternative to sterling LIBOR by an industry-wide working group and is independently calculated and based on actual borrowing transactions between financial institutions.

Why is a credit adjustment value being added to my Rate of Interest?

SONIA is calculated in a different way to sterling LIBOR. Following industry consultations, it was decided that in order to make SONIA a fair replacement for both lenders and borrowers, a small adjustment needs to be made to the interest rate to account for the difference in the way sterling LIBOR and SONIA are calculated. This is referred to as a ‘credit adjustment spread’. There is an industry standard methodology for calculating the credit adjustment spread, which is to take the median difference between the sterling LIBOR and SONIA rates over a five-year period. The median is the middle number of all the daily differences sorted from high to low.

How is the credit adjustment value calculated?

On 5 March 2021, the FCA announced the dates for the cessation of sterling LIBOR. As a result of this, the credit adjustment spread was calculated between the sterling LIBOR and SONIA rates by an industry body, the International Swaps and Derivatives Association (ISDA), using the industry standard methodology, based on the period from 6 March 2016 to 5 March 2021. You will have received communication from us notifying you of the credit adjustment spread applicable to your contract and you can also refer to your monthly statement for the new details of your Rate of Interest.

What is the impact on the Rate of Interest under your Agreement?

Prodigy Finance will apply the credit adjustment spread value to your new Base Rate (3-month ICE Term SONIA) and the fixed margin, which is applicable to your Agreement. This will form the Rate of Interest applicable to your Agreement.

How your previous LIBOR linked rate was calculated
3-Month Term GBP LIBOR + fixed margin applicable as stated in your loans agreement

How your new SONIA linked rate is calculated
3-month ICE Term SONIA + credit spread adjustment + fixed margin applicable as stated in your loan agreement

*ICE BENCHMARK ADMINISTRATION LIMITED MAKES NO WARRANTY, EXPRESS OR IMPLIED, EITHER AS TO THE RESULTS TO BE OBTAINED FROM THE USE OF ICE SONIA AND/OR THE FIGURE AT WHICH ICE SONIA STANDS AT ANY PARTICULAR TIME ON ANY PARTICULAR DAY OR OTHERWISE. ICE BENCHMARK ADMINISTRATION LIMITED MAKES NO EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE IN RESPECT OF ANY USE OF ICE SONIA.

Visit ICE’s website to find out more on SONIA Benchmarks.

Terms of Use:
The SONIA rates on this page are made available solely to Prodigy Borrowers as a reference for the benchmark rates used in the interest rate of their loans. When viewing these rates, no Prodigy customer nor any visitor to the Prodigy Finance website may sell, license, rent, modify, print, collect, copy, reproduce, download, upload, transmit, disclose, distribute, disseminate, publicly display, publicly perform, publish, edit, adapt, electronically extract or scrub, compile or create derivative works from any content or materials (including, without limitation, through framing or systematic retrieval to create collections, compilations, databases or directories) or otherwise transfer any of the content on this page to any third person.