In June 2023, the London Interbank Offered Rate (LIBOR) ceased, prompting participants to transition to an alternative benchmark. As a result, international banking group Standard Chartered initiated court proceedings in the United Kingdom to seek a declaration on the alternative interest rate to USD LIBOR that should be used as a benchmark for paying dividends on preference shares it issued in 2006. The bank proposed using the Secured Overnight Financing Rate (SOFR) instead.

Several hedge funds disagreed with Standard Chartered’s position, arguing that upon the cessation of LIBOR, the preference shares should either be redeemed or, alternatively, a rate based on the last published LIBOR rate could be used instead.

Senior Managing Director Faten Sabry was retained by counsel on behalf of Standard Chartered to provide expert opinion on a suitable replacement interest rate for the preference shares. Dr. Sabry filed three expert reports in the case, including a joint report with the opposing expert. Her analysis examined alternative benchmarks and possible credit adjustments using standard economic metrics to identify the proposed rate closest to three-month USD LIBOR. She also examined the impact of the proposed rate on the returns to investors over various economic conditions including the credit crisis of 2008 and the COVID pandemic. She also examined market evidence regarding the preference shares and similar securities to assess the market reaction to news about the cessation of LIBOR.

The UK High Court accepted Dr. Sabry’s testimony and adopted the proposed interest rate as the suitable replacement for USD LIBOR concerning the preferred shares in question, stating it was a “reasonable alternative rate” that had been “endorsed by financial regulators of the major markets in the US and the UK.”