As preparation for the transition from the London Interbank Offered Rate and similar interbank offered rates to replacement benchmark interest rates quickly accelerates, we explore a number of recent core global developments affecting structured finance products.
Mary Jo N. Miller is Mayer Brown’s US Banking & Finance professional support lawyer, and a member of the firm’s Knowledge Management department. She uses her extensive experience as a banker and finance lawyer to help the practice stay abreast of cutting edge financing issues and products, and deliver work product of the highest quality. Mary Jo’s practice also focuses on developing form documents and other practice resources, training lawyers, and assisting in the development and implementation of technology to allow the practice’s lawyers to leverage internal and external knowledge to build deeper client relationships and deliver excellent client service.
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On November 18, 2020, ICE Benchmark Administration (“IBA”), the authorized administrator of LIBOR regulated by the UK Financial Conduct Authority (“FCA”), announced that it will consult on its intention to cease publication of all tenors of euro, sterling, Swiss franc and yen LIBOR after December 31, 2021, subject to confirmation following IBA’s consultation and any rights of the FCA to compel continued publication by IBA. IBA is still in discussions with the FCA, official sector bodies, and panel banks regarding the future of US Dollar LIBOR.
Continue Reading “The End is Nigh”: UK FCA Issues Consultations Regarding Expected New Benchmark Powers in Response to ICE Benchmark Announcement; ISDA Issues Related Statement
The Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency (“OCC”), and the Federal Deposit Insurance Corporation (collectively, the “Agencies”) released an Interagency Statement on Reference Rates for Loans on November 6, 2020, in which they reiterated that they do not endorse SOFR—the Secured Overnight Financing Rate—or any other specific replacement rate for the London Interbank Offered Rate (“LIBOR”), for use in loan transactions.
Continue Reading “To SOFR or Not to SOFR?”: Prudential Banking Regulators Encourage Fallback Provisions to an “Appropriate” LIBOR Replacement Rate
On September 28, 2020, the Loan Syndication and Trading Association (“LSTA”) exposed draft revisions to the LSTA form of Par/Near Par Loan Trade Confirmation Standard Terms and Conditions to facilitate the transition from LIBOR to SOFR (or other alternative risk-free rates (“RFRs”)) for the US syndicated loan market. Once these revisions are finalized, comparable revisions will be made to the LSTA’s distressed documentation.
Continue Reading The LSTA Proposes Changes to Trading Documents for LIBOR Transition
On October 2, 2020, the US Loan Syndication and Trading Association (“LSTA”) released for comment an exposure draft of LIBOR Replacement Provisions for Amendment of CLO Indenture and announced its intention to publish a final version in November. The LSTA stated that the purpose of the operative LIBOR replacement provisions and accompanying form of supplemental indenture is to provide a template for CLO investors and transaction parties to use in connection with a CLO transaction that does not already contain provisions to effect the transition or fallback from LIBOR to a non-LIBOR benchmark rate upon the occurrence of specified LIBOR transition events.
Continue Reading LSTA Exposes Draft Supplemental Indenture for Legacy CLOs Without Fallbacks in Order to Facilitate Transition from LIBOR
On August 7, 2020, the Alternative Reference Rate Committee of the U.S. Federal Reserve (the “ARRC”) released a three-part “SOFR Starter Kit.” The first two parts provide a history of the events that led to the replacement of the London Inter Bank Offered Rate (“LIBOR”), the choice of the Secured Overnight Financing Rate (“SOFR”) as its replacement for U.S. dollar LIBOR-based financial contracts, and how SOFR compares with LIBOR.
It is part three that brings together the numerous resources that the ARRC has published to implement its key recommendations, including links to its Best Practices (revised on September 7 to anticipate the imminent release of ISDA’s IBOR Fallback Protocol), syndicated loan conventions, refreshed recommended business loans fallback language, and an internal systems transition guide.