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

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

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

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

On April 8, the ARRC announced that it had agreed on a recommended spread adjustment methodology for cash products referencing USD LIBOR.

The ARRC’s recommended methodology is intended for use in for USD LIBOR contracts that have incorporated the ARRC’s recommended hardwired fallback language or for legacy USD LIBOR contracts where a spread-adjusted SOFR can