Oct. 14 (Bloomberg) -- Electricite de France SA will use an alternative to the London interbank offered rate, or Libor, on an 11 billion-pound ($19 billion) loan to finance the takeover of British Energy Group Plc.

Instead of Libor, the world's biggest nuclear utility will pay interest based on an average of funding rates supplied by BNP Paribas SA, Deutsche Bank AG, Royal Bank of Scotland Group Plc, Banco Santander SA and Societe Generale SA, according to a banker involved in the deal.

``The Libor rate was broken,'' said Wilson Chin, rates strategist at ING Groep NV in Amsterdam. ``It's coming back at the moment.''

Banks stopped lending to one another amid the worst credit crisis since the Great Depression, causing money-market rates to spiral to records and leading to the failure of Lehman Brothers Holdings Inc. and Iceland's three biggest lenders. Three-month pound Libor fell for a second day after European governments announced coordinated action to avert a financial collapse, followed by a $250 billion cash injection by the U.S.

``The measures taken, including the recapitalization of banks and the injection of liquidity, will help Libor recover its position as a benchmark,'' said Luis Maglanoc, head of credit research at UniCredit SpA.

EDF, based in Paris, has agreed to pay an interest margin of 100 basis points for six months on a one-year portion of the loan, rising to 110 basis points for the last six months, and 120 basis points over benchmark rates on a three-year portion of the loan, according to Carole Trivi, a Paris-based spokeswoman for the company.

Trivi said EDF is paying an ``average'' cost of 7 percent on the debt. She didn't specify the benchmark borrowing rate.

Libor Fixings

BNP Paribas, Bank of Tokyo-Mitsubishi Ltd., Barclays Plc, HSBC Bank Plc, RBS and Societe Generale are arranging the loan, according to data compiled by Bloomberg.

EDF agreed to buy East Kilbride, Scotland-based British Energy Group last month for 12.5 billion pounds.

Sixteen banks, including BNP, Deutsche Bank and RBS, are on the British Bankers' Association's panel to set pound Libor. The benchmark, set by a survey conducted by the BBA each day in London, determines rates on $360 trillion of financial products worldwide, from home loans to derivatives. Member banks provide estimates on how much it would cost to borrow in 10 currencies for terms between one day and a year.

``It would be surprising if Libor fell into general disuse,'' said Chin at ING. ``The whole industry of swap contracts is linked to Libor. In one-off situations I could see'' more loans based on alternative benchmarks, ``but not on a widespread basis,'' he said.

To contact the reporter on this story: Cecile Gutscher in London at cgutscher@bloomberg.net

Last Updated: October 14, 2008 09:45 EDT