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

ISDA had intended to publish a supplement to the 2006 ISDA Definitions such that new transactions incorporating them would include fallbacks for LIBOR cessation (the Supplement), and a protocol to facilitate amendments to legacy derivate contracts (the Protocol) (for more information, see our earlier blog post). ISDA initially expected publication of the supplement and protocol to occur in the coming months. However, on September 21, 2020 they published a letter in which the Protocol and Supplement timeline was updated.

Continue Reading ISDA Delays Publication of IBOR Fallbacks, Supplement and 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

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

As the 2021 deadline for the cessation of LIBOR approaches, two key milestones for the LIBOR transition in the derivatives space are set to occur in the second half of 2020. These are the SOFR discounting switch and publication of the ISDA Protocol and Supplement amending the 2006 ISDA Definitions. Market participants anticipate that these changes will continue to increase risk-free rate (RFR) trading volumes and address liquidity concerns.

Continue Reading Liquidity Concerns and Key 2020 Milestones in the LIBOR Transition for Derivatives Transactions

On June 30, the ARRC published a revised version of its hardwired fallback language for new US Dollar LIBOR-linked syndicated loans. Along with this updated language, the ARRC also updated its user’s guide, which contains guidance for market participants for the adoption of the refreshed fallback provisions.

Continue Reading ARRC Publishes Updated Recommended Fallback Language for New USD LIBOR-Linked Syndicated Loans

In his speech in July 2019, Andrew Bailey called for public debate on potential outcomes for legacy contracts that prove unable to convert or be amended to include fallbacks to risk free rates before the discontinuance of LIBOR. In response to that speech, the Working Group on Sterling Risk-Free Reference Rates last week published a paper on how to catalyse the transition of such ‘tough legacy’ contracts away from LIBOR.

To address ‘tough legacy’ contracts, the Working Group has proposed that the UK Government consider introducing legislation. They note that in the U.S., the Alternative Reference Rates Committee (the ARRC) has proposed a similar approach and there would be benefits from the international consistency that would result from the UK mirroring this.


Continue Reading “Tough Legacy” Contracts May Require Legislative Fix to Catalyse Their Transition Away From LIBOR, Says Working Group

On April 17, the ARRC released a set of key objectives for 2020 that the ARRC has set for itself to support the voluntary use of SOFR as an alternative to USD LIBOR. The ARRC stated that its objectives were developed keeping in mind the current expectation that LIBOR can no longer be guaranteed beyond the end of 2021, noting that this timeline was recently reinforced by the UK FCA in a statement released in the context of dislocations surrounding the coronavirus.

Continue Reading ARRC Announces Key Objectives for 2020

Following the selection of alternative risk-free rates (RFRs) to replace each of the five LIBOR currencies: SOFR (for USD LIBOR), SONIA (for GBP LIBOR), SARON (for CHF LIBOR), TONAR (for JPY LIBOR) and €STR (for Euro LIBOR), ISDA launched consultations to obtain input from market participants on how to address the adjustments required as a

On January 21, 2020, the ARRC released a Consultation on spread adjustment methodologies for cash products referencing U.S. dollar (USD) LIBOR. The ARRC indicated that the spread adjustments are intended for use (i) in USD LIBOR contracts that have incorporated the ARRC’s recommended hardwired fallback language, or (ii) for legacy USD LIBOR contracts where a spread-adjusted SOFR can be selected as a fallback. The adjustments seek to establish a  static  spread  adjustment  that  would  be  fixed  at  a  specified  time  at  or  before  LIBOR’s  cessation and would adjust for the historical differences between LIBOR and SOFR and are intended to make the spread-adjusted rate comparable to LIBOR (the ARRC clarified that it is not considering dynamic spread adjustments). In addition to the methodology for determining spread adjustments, the ARRC is requesting comment on whether a “transition period” over which the applicable spread adjustment would be implemented should be included for any cash products in order to smooth the effects of a potentially abrupt transition to a new spread-adjusted rate, which may differ significantly from the rates prevailing at the time LIBOR is discontinued.

Continue Reading ARRC Consultation on Spread Adjustment Methodologies