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

A live 90-minute CLE webinar with interactive Q&A


Tuesday, July 10, 2018

1:00pm-2:30pm EDT, 10:00am-11:30am PDT

or call 1-800-926-7926

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

The U.K.’s Financial Conduct Authority announced in July 2017 that it would stop requiring reference banks to quote LIBOR by the end of 2021. This will be a massive transition for financial markets because LIBOR is used to calculate floating or adjustable rates on trillions of dollars in loans, bonds, derivatives and other financial contracts. Counsel must contemplate the phase-out when drafting contracts and reviewing existing contracts.

Alternative reference rate language varies from transaction to transaction, and in some cases will need to be added or modified to account for the LIBOR phase-out. Counsel should review credit documents with a term beyond 2021 to ensure that the proper fallback language is incorporated, including the appropriate triggers for switching to an alternative reference rate and the mechanics for how an alternative reference rate will be chosen.

The U.S. replacement for U.S. dollar LIBOR is the Secured Overnight Financing Rate (SOFR), a broad-based Treasury repo financing rate recommended by the Alternative Reference Rate Committee (ARRC) of the Federal Reserve Bank of New York, published on a daily basis since Apr. 3, 2018. Questions remain, however, regarding industry acceptance and how best to transition from LIBOR to SOFR in existing and proposed transactions.

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 the potential approaches for mitigating the uncertainty surrounding these changes, including the use of SOFR as a substitute rate.

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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. Effect on derivatives
  5. Alternative rates
  6. Determining whether financial contracts should be amended
  7. Recommended changes to form

Benefits

The panel will review these and other critical issues:

  • What is the timeline for LIBOR’s phase-out?
  • What kinds of financing 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 and the use of SOFR as a substitute rate?
  • What should counsel look for in ISDA agreements to confirm a suitable alternative rate?

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

Shareholder
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

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