RLPC-EDF 11 bln stg loan priced on reference rate-sources

LONDON, Oct 13 (Reuters) - Pricing on EDF's (EDF.PA) 11 billion pound ($19 billion) loan backing its 12.5 billion pound acquisition of British Energy (BGY.L) is based on a bank reference rate, sources close to the deal said on Monday.

That makes it the first European jumbo financing to move away from screen-based LIBOR rates, the banking sources said.

Bankers said Libor is no longer an accurate reflection of individual banks' funding costs, due to widespread distrust and illiquidity in the interbank market and banks' unwillingness to disclose high funding costs for fear of exacerbating the problem.

The reference bank rate setting mechanism is the traditional method of calculating Libor rates that was widely used before the move to screen-based rates. It is the rate at which banks take deposits and is calculated by averaging the funding costs of a representative number of banks.

The decision to price the deal on a reference rate was made when the deal was first mandated in the summer, one of the sources added.

"This is not a reaction to what's happened in the last ten days," the source said.

Reference rates have already been applied to a number of smaller deals this year, a second banking source said.

The five banks to set the reference rate on the EDF deal are BNP Paribas, Deutsche Bank, RBS, Santander and Societe Generale. The rate is determined by taking an average of the five rates supplied privately to the facility agent.

"The banks were selected to give a good broad European blend of funding costs," the first banking source said.  Continued...