As we approach the ARRC’s September 30, 2020 deadline for new issue
syndicated loans to include the ARRC’s recommended hardwired fallback
language, several market sources report that a borrower has included the
language in an amendment to its term loan and revolving facilities
documentation in what appears to be the first example of the language’s
adoption in a syndicated loan.

The amendment incorporates the ARRC’s hardwired fallback language, with two

  1. an amendment which sets out that the rates waterfall may be amended so
    that the Benchmark Replacement will become Term SOFR plus the applicable spread adjustment if Term SOFR becomes available after the initial transition from LIBOR. The position under the ARRC’s hardwired fallback language is that, if Term SOFR is not available on the LIBOR cessation date, the Benchmark Replacement is daily SOFR calculated in arrears (with no built in mechanism for the waterfall to be amended on a later availability of Term SOFR); and
  2. a number of non-controversial minor amendments to account for non-U.S.
    dollar LIBOR Loans which are required on the basis that the ARRC’s
    hardwired fallback language does not include guidance for multicurrency

In the coming months, it is anticipated that additional new issue and
amended syndicated loans will incorporate the ARRC’s hardwired fallback
language as market participants strive to comply with the ARRC’s Transition
from U.S. Dollar LIBOR Timeline.

Please contact any of the authors of this article or your regular
McGuireWoods contact if you have questions about, or would like assistance
with, the LIBOR transition.