On July 27, 2017, Andrew Bailey, the chief executive of the UK Financial Conduct Authority (FCA), announced in a speech that after 2021 the FCA would no longer use its power to persuade or compel panel banks to submit rate information used to determine LIBOR. Mr. Bailey encouraged the market to develop robust alternative reference rates to replace LIBOR.

This speech marks a turning point in the history of LIBOR. Regulators have been concerned that LIBOR may cease to exist as a financial benchmark, and that such cessation could cause significant disruption to the market. Mr. Bailey’s announcement of an arbitrary deadline has caused market participants to look anew at replacing references to LIBOR in a large number of financial contracts with references to alternative reference rates now being developed, and to reconsider LIBOR fallback language currently contained in existing contracts. Mr. Bailey’s remarks also indicate that the reform of LIBOR, which had been a regulatory goal, is no longer a viable option in the FCA’s view.

Background and Summary

The English scheme of arrangement (“Scheme”) has found particular utility throughout the European Union (the “EU”) and internationally as a restructuring tool for both foreign and UK companies alike. Providing creditors with access to a court sanctioned compromise procedure (which can be used prior to formal insolvency), the Scheme has combined flexibility with a high degree of commercial and procedural certainty for all involved, including creditors.

However, there is the question of whether the appeal of the Scheme looks to be threatened by the outcome of the UK’s 2016 referendum to withdraw from the EU (“Brexit”). Departure from the EU will only occur in the spring of 2019 following two years of exit negotiations, but at this stage, the exact Brexit model remains distinctly unclear. This post shows that whilst Schemes will face challenges they should survive the impact of Brexit and maintain the UK’s position as a key restructuring jurisdiction.