LONDON (Reuters) -Standard Chartered won its bid in a London court on Tuesday to replace the financial benchmark it used to set dividend rates for some shares, in an early case over the transition away from Libor.
The bank wanted to change the three-month US dollar Libor interest rate that was used to set dividends on some preference shares to one based on the Secured Overnight Financing Rate (SOFR), despite opposition from a group of investors.
The High Court ruled that Standard Chartered’s proposed new rate based on SOFR was a “reasonable alternative rate” on which to base dividend payments.
Judges Julian Flaux and David Foxton said Standard Chartered’s SOFR-based alternative is “a well-established rate used across the financial markets”.
Standard Chartered’s primary case, that the terms of the preference shares required a rate that effectively replicated or replaced three-month US dollar Libor, was rejected.
The case was heard as the tarnished London Interbank Offer Rate, or Libor, finally ceased late last month. Libor was replaced in June 2023, though a synthetic version of the rate continued until the end of September to ease the transition.
It focused on $750 million of preference shares issued in 2006, with the interest rate payable set to 3-month US dollar Libor a decade later.
Funds run by U.S. investor DE Shaw and hedge fund manager Bracebridge Capital had argued that when Libor ended, the preference shares ought to be redeemed, or alternatively a rate based on the last published Libor rate could be used.
A spokesperson for the funds’ lawyers at Quinn Emanuel said in a statement that the ruling “enables Standard Chartered to impose a fundamentally different commercial bargain on its investors from what had been agreed.”
Standard Chartered did not immediately respond to a request for comment.
(Reporting by Sam Tobin; Editing by William James and Mark Porter)
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