When amending a material term of a loan transaction that includes guarantees and/or security governed by the laws of several jurisdictions, it is often prudent for creditors to obtain guarantee and/or security confirmations to ensure that the amendment does not adversely affect their rights to claim under the guarantee or enforce the security.  As we head toward 2021, it is well documented[1] that loan agreements with final maturities beyond the end of 2021 that are priced by reference to an IBOR benchmark will need to be amended unless they contain fallback provisions that stipulate a replacement rate for, or procedure for replacing, the relevant IBOR.  So, will changing the benchmark rate necessitate guarantee and/or security confirmations, or will this additional hurdle be something that can be avoided?

Continue Reading Will Amending a Facility Agreement to Move from an IBOR to an RFR Require Guarantee and Security Confirmations?

The UK Government released its promised[1] draft legislation, Financial Services Bill 200, on October 20, 2020,[2] to assist the ‘tough legacy’ issue for certain LIBOR-referencing contracts by providing the UK’s Financial Conduct Authority with new and enhanced powers to oversee the orderly wind-down of critical benchmarks, such as LIBOR. The legislation includes the authority for the FCA to direct a change in the methodology of a critical benchmark and extend its publication for a limited time period.

Continue Reading Promised UK ‘Tough Legacy’ Legislation Released; HM Treasury Issues Supporting Policy Statement

Sterling RFR Working Group Summary Papers

On 16 October, the Working Group on Sterling Risk-Free Reference Rates (“RFRWG”) announced the publication of two documents in their ongoing work to inform and ease the path of transition from IBORs.  The papers summarise the current position in relation to two resources: the beta versions of Term SONIA Reference Rates (“TSRRs”) and risk-free rate (“RFR”) calculators.


Continue Reading Sterling Working Group: The Latest Position on RFR Calculators and Beta Term SONIA Reference Rates

On 16 October, the Loan Market Association (“LMA”) published an updated version of a list that sets out the near risk-free rate (“RFR”) referencing loans which have been announced to date. The list is based on publicly available information and seeks to raise awareness of RFR-referencing loans by providing information on the conventions used.

Continue Reading LMA publishes latest list of RFR referencing loans

The LMA’S Latest Tools

On 11 September 2020, the LMA added to their complement of exposure drafts by publishing a draft multicurrency term and revolving facilities agreement incorporating rate switch provisions (the “Switch FA”).  This came on the heels of a note issued by the LMA[1] setting out optional supplementary language (the “LMA Supplement”) to be added to its existing Revised Replacement of Screen Rate Clause.

Why Is The LMA Producing These Documents Now?

The LMA has augmented its Revised Replacement of Screen Rate Clause before, but the Switch FA and the LMA Supplement were drafted in response to specific statements made by the Working Group on Sterling Risk-Free Reference Rates (“RFRWG”).  Those statements[2] (the “RFRWG Statements”) made it clear that the February 2020 form of Revised Replacement of Screen Rate Clause[3] would not satisfy the RFRWG’s objective that after the end of Q3 2020, sterling LIBOR referencing loan products should include a contractual mechanism for conversion to a suitable SONIA-based, or other alternative risk-free, rate (“RFR”).  These latest documents from the LMA are the most recent salvo in their ongoing efforts to facilitate the transition of the loan market away from LIBOR to alternative RFRs.


Continue Reading Documenting LIBOR Transition in the Loan Markets: The LMA Offers New Solutions, But Others Likely Will Follow