On 29 September 2021 the UK Financial Conduct Authority (“FCA”) published Consultation Paper CP21-29: Proposed decisions on the use of LIBOR (Articles 23C and 21A BMR), in which it set out its plans for the temporary publication of ‘synthetic’ versions of LIBOR for a narrow range of outstanding sterling and yen contracts that cannot
Will Amending a Facility Agreement to Move from an IBOR to an RFR Require Guarantee and Security Confirmations?
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 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?
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Sterling Working Group: The Latest Position on RFR Calculators and Beta Term SONIA Reference Rates
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.…
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Documenting LIBOR Transition in the Loan Markets: The LMA Offers New Solutions, But Others Likely Will Follow
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 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 (the “RFRWG Statements”) made it clear that the February 2020 form of Revised Replacement of Screen Rate Clause 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.…
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