Sainsbury to assess its borrowing costs over Libor Scandal

Sainsbury to Examine Potential Libor-Rigging Cost, Chairman Says

By Sarah Shannon – Jul 11, 2012 3:52 PM GMT+0100

J Sainsbury Plc (SBRY) Chairman David Tyler said the U.K.’s third-largest grocery chain will assess whether its borrowing costs have been affected by the attempted manipulation of the London interbank offered rate.

“It’s the right thing for me to look at, like any responsible company,” Tyler, 59, said in an interview at Sainsbury’s annual meeting of shareholders in London today. “It’s very unlikely we’ve been affected because most of our funding is on another basis, but of course it’s the right thing to check.”

Barclays Plc (BARC), the U.K.’s second-largest bank, last month was fined 290 million pounds ($451 million) in the U.K. and U.S. for attempting to manipulate Libor, the global benchmark for $360 trillion of securities including mortgages and other loans. Citigroup Inc. (C), Royal Bank of Scotland Group Plc (RBS) and Lloyds Banking Group Plc (LLOY) are among the firms regulators are investigating.

The grocer has various agreements that are linked to Libor, which could mean the company was undercharged or overcharged, Tyler said. Corporate loans typically pay interest pegged to Libor or its equivalents in other currencies, and swaps agreements used in hedging can also reference the benchmark.

Libor and Euribor, it’s equivalent in euros, are calculated using a survey of banks’ daily estimates of how much it would cost them to borrow from one another for different time frames and in different currencies.

Sainsbury said in May it ended its fiscal year on March 17 with about 2 billion pounds of debt.

“We have only heard about one bank so far. How many banks are being investigated by the authorities both sides of the Atlantic?” Tyler said. “We have to be careful not to rush to judgment about exactly what’s happened on the basis of one bank.”

Leave a Reply