On March 30, 2021, the LMA published its exposure draft RFR documentation as recommended forms, and updated the documentation to reflect, among other things, the Sterling Risk-free Rate Working Group’s (the Working Group) updated conventions. The LMA also replaced their single currency SONIA and SOFR exposure drafts with two recommended form single currency RFR facility agreements, and updated their RFR terms.

Continue Reading LMA Publishes New RFR Documentation and Updates Exposure Drafts to Recommended Forms

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

With the end of LIBOR drawing closer, the FCA, Bank of England and the Working Group on Sterling Risk-Free Reference Rates (the Working Group) are encouraging market participants to actively transition from referencing LIBOR rates in their loan agreements to risk-free rates (such as SONIA). In this respect, one important aspect that market participants need to consider is the credit spread adjustment (CAS) that will be required. Market participants use a CAS to mitigate the risk of value transfer when transitioning to risk-free rates due to the difference between LIBOR rates and the risk-free rates, caused by the lack of a credit risk premium in risk-free rates.

Continue Reading UK Working Group Publishes Paper on Credit Adjustment Spread Methodologies