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Freshfields advises Tesco plc on its new £2.5bn multicurrency revolving credit facility agreement, which was the first risk free rate referencing syndicated facility in the UK market.

Freshfields Bruckhaus Deringer (“Freshfields”) advised Tesco plc on a market leading new syndicated multicurrency revolving credit facility, which included references to both risk free rates and incorporated environmental, social and governance (“ESG”) pricing adjustments.  This was the first syndicated multicurrency facility in the UK market where interest is determined from signing by reference to the Sterling Overnight Index Average ("SONIA") and the Secured Overnight Financing Rate ("SOFR") for sterling and dollar loans respectively, instead of by reference to LIBOR.  This multicurrency facility also provides for loans drawn in euros, therefore the documentation incorporates mechanics for interest benchmarked against EURIBOR as a forward looking term rate, and with interest on sterling and US dollar loans calculated by reference to SONIA and SOFR compounded in arrears. Transition away from LIBOR to risk free rates is a key focus for the loan market currently and this facility agreement incorporated recent recommended market conventions for both SONIA and SOFR in the UK market.

In addition the facility agreement addresses the long standing commitment of Tesco to sustainability. The facility agreement contains pricing adjustments depending on how Tesco performs against ESG targets relating to Scope 1 and 2 greenhouse gas emissions, the volume of renewable energy contracted by the group and food waste. 

Martin Hutchings, the London Freshfields partner negotiating the transaction on behalf of Tesco, commented: “This is the first syndicated loan facility in the UK market referencing risk free rates from the outset and is therefore an important milestone in the continued transition from LIBOR referencing cash products.  It also highlights Tesco’s ongoing commitment to sustainability. We are delighted to have supported long standing client Tesco on this landmark transaction.”

The Freshfields team was led by partner Martin Hutchings and senior associate Verity Stevens.


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About Freshfields Bruckhaus Deringer

Freshfields Bruckhaus Deringer LLP is a global law firm with a long track record of successfully advising the world's leading national and multinational corporations and financial institutions on groundbreaking and business-critical challenges. Our team of more than 2,800 lawyers and other legal professionals delivers global results from our 28 offices worldwide. Our commitment, local and multinational expertise and business know-how means our clients can rely on us when it matters most.