On November 30, 2020, ICE Benchmark Administration (“IBA”), the administrator of U.S. Dollar LIBOR (“USD LIBOR”) and other IBORs, lowered the pressure with respect to the upcoming cessation of USD LIBOR. IBA announced that, following a consultation in December and January, (i) it intends to cease publication of 1-week and 2-month USD LIBOR at the

As 2021 quickly approaches, market participants are well on their way toward addressing the IBOR transition issues specific to their product portfolios. Structured finance products present additional levels of complexity that must be tackled.

Continue Reading Considerations for Transitioning Floating Rate Commercial Mortgage Loans Away from LIBOR

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 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

In a detailed 25-page memorandum to U.S. prudential banking regulators,[1] the Alternative Reference Rates Committee detailed concerns regarding the transition from LIBOR to SOFR and possible effects on current U.S. bank regulatory capital and liquidity requirements. In the memorandum, the ARRC makes several preliminary recommendations regarding changes to such requirements, in order to facilitate such transition and avoid unintended disincentives or other adverse regulatory consequences.

Continue Reading ARRC Requests Changes to Bank Regulatory Capital and Liquidity Requirements to Facilitate Transition from LIBOR to SOFR

On October 28, 2020, New York State Senator Kevin Thomas introduced Senate Bill S9070, which would add a new Article 12 to New York’s Uniform Commercial Code that substantially adopts the language from the proposed legislative solution produced by the Alternative Reference Rates Committee (ARRC) in March 2020. For some market participants,[1] this announcement may trigger hearing the Halleluiah chorus from Handel’s Messiah, while others may still be asking why it took so long, and still others may be asking why bother given its potential limitations.[2]

Continue Reading LIBOR Transition Assistance Legislation Introduced in New York State Senate

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

On October 13, 2020, the Division of Market Oversight of the Commodity Futures Trading Commission (“CFTC”) issued swap transaction and pricing data reporting relief to specific derivatives clearing organizations (“DCOs”) and market participants participating in upcoming DCO auctions that will help transition certain cleared swaps from discounting using the Effective Federal Funds Rate to the Secured Overnight Financing Rate. This discounting transition is an essential part of the industry-wide initiative to transition from swaps that reference the London Interbank Offered Rate, and other interbank offered rates, to swaps that reference alternative benchmarks.

Continue Reading US CFTC Provides Reporting Relief for Swaps Related to Upcoming DCO Auctions Required for LIBOR Transition

On Friday, October 9, 2020, the US Internal Revenue Service released Revenue Procedure 2020-44 (the “Revenue Procedure”), providing retroactive but limited relief for amending specific types of legacy contracts to add fallback mechanics for LIBOR or other IBORs. The fallback language included must rather strictly follow select model contract language recommended by the Alternative Reference Rate Committee (the “ARRC”) and the International Swaps and Derivatives Association (“ISDA”).

Continue Reading New Rev Proc 2020-44 Provides Limited Relief for Amending Legacy Contracts to Add IBOR Fallbacks

On September 28, 2020, the Loan Syndication and Trading Association (“LSTA”)[1] 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