As market participants evaluate their loan portfolios and implement strategies to transition away from the London Interbank Offered Rate (“LIBOR”), they must address not only third-party loans, but related-party loans as well.

Continue Reading LIBOR Phase Out – Tax Implications in the Context of Related-Party Loans

With the inclusion of the Adjustable Interest Rate (LIBOR) Act (the “LIBOR Act”) as Division U of H.R. 2471, Consolidated Appropriations Act, 2022 (the “Appropriations Act”) passed by the U.S. House of Representatives on 9 March 2022 and the Senate on 10 March 2022, the United States is on the cusp of a federal solution for legacy LIBOR-linked contracts that contain inadequate fallback provisions, or none at all. Indeed, the final version of the legislation provides additional legal certainty with respect to the use of non-SOFR benchmarks not included in the earlier version of the legislation passed by the U.S. House of Representatives.

Continue Reading Consolidated Appropriations Act Advances Federal LIBOR Transition Solution

On 30 December 2021, the U.S. Internal Revenue Service (IRS) published final regulations for IBOR transition. Our 7 January 2022 Legal Update provides background on the principle U.S. federal income tax concern with IBOR-related amendments to existing contracts, an overview of previous IRS guidance aimed at addressing the concern, the types of modifications that can

With fewer than 30 days until the cessation of LIBOR, another piece of the puzzle has fallen into place for U.S. dollar LIBOR transition. On 30 November 2021, Refinitiv, the ARRC-preferred publisher of spread-adjusted SOFR-based fallback rates, announced that its USD IBOR Institutional Cash Fallbacks (“Institutional Fallbacks”), launched on 11 August 2021 as prototype rates, are now available for use as production benchmarks.

Continue Reading Refinitiv Spread-Adjusted Fallback Rates Become Production Benchmarks

On 20 October 2021, in a Joint Statement on Managing the LIBOR Transition, the Board of Governors of the Federal Reserve System, Consumer Financial Protection Bureau (“CFPB”), Federal Deposit Insurance Corporation, National Credit Union Administration, Office of the Comptroller of the Currency, and State Bank and Credit Union Regulators (the “Regulators”) emphasized their expectations that supervised institutions will transition away from LIBOR in an orderly fashion by the end of 2021. Transition preparedness will be an increasing area of supervisory focus and review.

Continue Reading Financial Regulators Clarify Key LIBOR Transition Considerations But Some Questions Remain

The version of the proposed federal Adjustable Interest Rate (LIBOR) Act of 2021 that was introduced in the House of Representative in 2020 mirrored, with a handful of notable exceptions, both the substance and the text of the analogous New York State legislation that became law on 6 April 2021 (the New York statute is included as a new article 18-C of the General Obligations Law).  However, the text of the proposed federal statute that the House Committee on Financial Services ordered reported to full House on 28 July of this year differs markedly from the New York statute.

Continue Reading A Closer Look at the Adjustable Interest Rate (LIBOR) Act of 2021

Despite recent regulatory “encouragement” to adopt SOFR as “preferred” by the Alternative Reference Rates Committee (ARRC), we continue to observe credit agreements in the US loan markets that use a credit-sensitive alternative rate (CSR) to SOFR.

In fact, a recent check of public filings showed eight reported credit agreements that used a CSR, specifically the