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Where we left off:  In our Mid-Year Check-In blogpost, we noted that progress in the development and readiness of some credit sensitive interest rate indices (e.g., Bloomberg’s BSBY, IBA’s Bank Yield Index and American Financial Exchange’s AMERIBOR) seemed to spark some urgency in the development of SOFR’s forward-looking term rate in Q2, including the ARRC’s selection of CME Group as administrator for Term SOFR, and the CFTC’s SOFR First Initiative to encourage primary market swaps dealers to quote USD swaps at SOFR.  Those efforts culminated in the ARRC’s formal recommendation of Term SOFR for use in the bank loan market on July 29, 2021.
Continue Reading Banks Press Ahead with Term SOFR Preparation; Credit Sensitive Rates Under Scrutiny

On March 25, 2021, the Alternative Reference Rates Committee (ARRC) released supplemental recommendations for its hardwired fallback language for US dollar denominated syndicated and bilateral loans. The ARRC’s supplemental recommendations follow the certainty on fallback timings and economics afforded by the March 5, 2021 announcements by ICE Benchmark Administration, the UK Financial Conduct Authority and ISDA regarding the cessation of LIBOR.
Continue Reading ARRC Releases Supplemental Versions of its Recommended Hardwired Fallback Language

On January 28, 2021, the UK Loan Market Association (LMA) published exposure drafts of two multicurrency term and revolving facilities agreements which incorporate, among others, backward-looking compounded risk-free rates (the Exposure Drafts). In addition, the LMA published commentary on the Exposure Drafts, which aims to assist market participants in understanding the terms thereof. The Exposure Drafts are based on the LMA’s exposure draft switch rate agreements discussed in our earlier blog post. The LMA hopes that their publication will facilitate awareness of the issues involved in structuring multicurrency syndicated loans which use backward-looking compounded risk-free rates (RFRs).
Continue Reading LMA Publishes RFR Facility Documentation

The IRS recently released Revenue Procedure 2020-44 (“Rev. Proc. 2020-44”) which provides helpful relief to taxpayers by providing that if a contract referencing an IBOR is modified to incorporate specific ISDA or AARC fallback language for the replacement of IBORs, such modification will not cause certain adverse tax consequences, such as exchange treatment under Section 1001 of the Tax Code, or the legging out or termination of integrated transactions under Treasury Regulation Sections 1.1275-6, 1.988-5(c) or 1.148-4(h).
Continue Reading IRS Revenue Procedure 2020-44: Floating Rate Fallback Flexibility from the Feds

On Monday, November 30, 2020, ICE Benchmark Administration (“IBA”), as administrator of LIBOR, announced that it will consult in early December 2020 on its plan to cease publication of the overnight and one-, three-, six- and 12-month U.S. Dollar LIBOR (“USD LIBOR”) settings immediately following the LIBOR publication on June 30, 2023.[1] This announcement represents an effective extension of the end date for USD LIBOR, which previously was expected to cease following 2021.
Continue Reading ICE Benchmark Administration Proposes Extension of Most U.S. Dollar LIBOR Tenors Through June 2023; Move is Supported by the UK Financial Conduct Authority

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)

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

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

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…