On November 6, 2020, Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency (“OCC”), and the Federal Deposit Insurance Corporation (“FDIC”) (collectively, the “Agencies”) issued a joint “Statement on Reference Rates for Loans” (the “Joint Statement”).
Continue Reading Regulator Joint Statement Highlights Need to Move on from LIBOR (But For Some, Not Necessarily to SOFR)
ARRC Hardwired Fallback Language’s First Adoption in a Syndicated Institutional Loan
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.
Continue Reading ARRC Hardwired Fallback Language’s First Adoption in a Syndicated Institutional Loan
Loan Syndications and Trading Association Published Concept SOFR Credit Agreement
In an important step for the syndicated loan market in transitioning to SOFR and away from LIBOR as a benchmark interest rate, the Loan Syndications and Trading Association (“LSTA”) recently published what it deems a “concept” credit agreement (we’ll call it the “Concept SOFR Agreement” here) that references daily simple SOFR or daily compounded SOFR. The Concept SOFR Agreement can be found on the LSTA’s website, along with a blackline against the LSTA’s form term loan agreement referencing LIBOR (available to LSTA members at www.lsta.org).
Continue Reading Loan Syndications and Trading Association Published Concept SOFR Credit Agreement
ARRC Updates Recommended Best Practices in Anticipation of ISDA’s IBOR Fallback Protocol
On August 19, 2020, the ARRC updated its recommended Best Practices for the LIBOR transition in anticipation of the imminent publication of ISDA’s IBOR Fallback Protocol (the “Protocol”) (which we discussed in our earlier blog post, available here).
These updates follow the July 22, 2020 letter from ISDA (the “Letter”) (available here), in
LIBOR Transition: Business Loans SOFR Summer Wrap Up
It’s been a busy summer in the land of LIBOR transition preparation. As part of the ARRC’s ongoing efforts to prepare the cash product markets for the transition to SOFR and away from LIBOR as a benchmark interest rate, it posted ten separate releases between Memorial Day and August 7, 2020, in addition to hosting six “SOFR Summer Series” panel discussions on various SOFR topics (which were recorded and can be accessed here). This blogpost focuses on aspects of the ARRC’s releases relating to business loans.
Read on for more details, but here are a few major takeaways: (1) don’t expect any COVID related delays in the LIBOR sunset schedule – work on implementing hardwired LIBOR fallback language this fall and plan stop using LIBOR by mid-2021; (2) the ARRC now recommends simple SOFR in arrears as the best available fallback rate alternative for most business loans (at least until a term SOFR in advance market develops); and (3) feedback from the business loan market reflects a preference for following ISDA’s lead on LIBOR to SOFR transition issues whenever practicable to facilitate consistency between swaps and business loans (e.g., spread adjustments and certain conventions).Continue Reading LIBOR Transition: Business Loans SOFR Summer Wrap Up
CFPB Issues Proposals and Updated Guidance Ahead of LIBOR Discontinuation
On Thursday, June 4, the Consumer Financial Protection Bureau (“CFPB”) issued guidance to address issues arising out of the pending discontinuation of LIBOR and the resulting need for creditors to transition to other benchmarks. As the CFPB has noted, at this time, the transition is expected after 2021, with the anticipated shift to the Secured Overnight Financing Rate (“SOFR”) index supported by the Alternative Reference Rates Committee (ARRC), a public-private working group organized to address the transition. Ahead of an inevitable, challenging transition, the CFPB issued an extensive rulemaking proposal with request for public comment, a revised consumer handbook, and updated compliance guidance.
Continue Reading CFPB Issues Proposals and Updated Guidance Ahead of LIBOR Discontinuation
The Latest From the Loan Syndications and Trading Association (LSTA)
On February 26, 2020, the LSTA released a revised draft to its Compounded SOFR in Arrears “concept credit agreement”, which was initially released on October 1, 2019 (see a brief summary of the initial concept credit agreement). In addition to bringing the concept credit agreement current with other LSTA form changes, the update addresses
The Latest From the Loan Syndications and Trading Association (LSTA)
On October 1, 2019, the LSTA released to its members a draft “concept credit agreement” illustrating how a compounded average of daily SOFRs calculated in arrears might be incorporated into the LSTA’s form of Credit Agreement (a reference document that the LSTA has long maintained for basic syndicated lending provisions).
Continue Reading The Latest From the Loan Syndications and Trading Association (LSTA)