Phase-Out of LIBOR: Impact on Floating Rate Loans and Derivatives; Implementing Alternative Reference Rates

An encore presentation featuring live Q&A

Recording of a 90-minute CLE webinar with Q&A


Conducted on Wednesday, January 3, 2018

Recorded event now available

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Program Materials

This CLE webinar will discuss various ramifications of the scheduled phase-out of LIBOR (London Interbank Offered Rate) at the end of 2021, and steps lenders and finance counsel should take now to assess and possibly amend existing transaction documentation and to manage new transactions. The panel will also discuss the impact on swaps and other derivatives and how to evaluate alternative rate language in ISDA documents.

Description

On July 27, 2017, the U.K.’s Financial Conduct Authority announced that it will stop requiring reference banks to quote LIBOR by the end of 2021. LIBOR is used in calculating floating or adjustable rates on trillions of dollars in loans, bonds, derivatives and other financial contracts. Counsel must contemplate the phase-out in drafting contracts and reviewing existing contracts.

Alternative reference rate language varies from transaction to transaction, and finance counsel should review credit documents with a term beyond 2021 to ensure they understand the mechanics of how the lender or service may determine and pick among alternative reference rates.

While the choices are narrowing, it is not clear what index, or combination of indexes, will replace LIBOR. One possibility for U.S. dollars that has been identified by the U.S. Alternative Reference Rate Committee, and which the Federal Reserve Bank of New York has proposed publishing in cooperation with the Office of Financial Research, is the broad treasuries repo financing rate (BTFR). Questions still remain, however, and this rate is not currently quoted nor does it provide for terms longer than overnight.

Listen as our authoritative panel discusses the impact of the phase-out of LIBOR on various commercial and consumer loans, as well as on derivatives transactions, and discusses potential approaches for approaching the uncertainty surrounding these changes.

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Outline

  1. LIBOR—reasons and timeline for phase-out
  2. Impact on commercial lending—floating rate transactions
  3. Impact on securitized and packaged consumer loans
  4. Impact on derivatives
  5. Alternative rates
  6. Open-ended adjustment language—“as determined by lender”
  7. Determining whether loan documents should be amended
  8. Recommended changes to forms until an alternative industry standard rate is established
  9. Litigation Perspective

Benefits

The panel will review these and other key issues:

  • What is the timeline, and what kinds of finance transactions will be impacted by the phase-out of LIBOR?
  • What are the issues with alternative rate language currently contained in loan documents?
  • How should floating rate forms be revised to address the phase-out, given the current uncertainty as to the substitute rate?
  • What should counsel look for in ISDA agreements to confirm a suitable alternative rate is provided?
  • Risks

This is an encore presentation with live Q&A.

Faculty

Aaron, Cheryl
Cheryl I. Aaron

Senior Counsel
Michael Best & Friedrich

Ms. Aaron represents financial institutions, energy companies, and commodity trading firms (including both end-users...  |  Read More

Heimendinger, Mark
Mark Heimendinger

Of Counsel
Lowndes Drosdick Doster Kantor & Reed

Mr. Heimendinger has worked on a variety of financing structures and instruments, with a particular focus on real...  |  Read More

Toscano, James
James S. Toscano

Shareholder
Lowndes Drosdick Doster Kantor & Reed

Mr. Toscano has extensive experience in a broad range of commercial and high profile litigation matters. He has tried...  |  Read More

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