Nixon Peabody LLP

  • People
  • Capabilities
  • Insights
  • About

Trending Topics

    • People
    • Capabilities
    • Insights
    • About
    • Locations
    • Events
    • Careers
    • Alumni

    Practices

    View All

    • Affordable Housing
    • Community Development Finance
    • Corporate & Finance
    • Cybersecurity & Privacy
    • Environmental
    • Franchising & Distribution
    • Government Investigations & White Collar Defense
    • Healthcare
    • Intellectual Property
    • International Services
    • Labor & Employment
    • Litigation
    • Private Wealth & Advisory
    • Project Finance
    • Public Finance
    • Real Estate
    • Regulatory & Government Relations

    Industries

    View All

    • Cannabis
    • Consumer
    • Energy
    • Entertainment
    • Financial Services
    • Healthcare
    • Higher Education
    • Infrastructure
    • Manufacturing
    • Non Profit
    • Real Estate
    • Technology

    Value-Added Services

    View All

    • Alternative Fee Arrangements

      Developing innovative pricing structures and alternative fee agreement models that deliver additional value for our clients.

    • Continuing Education

      Advancing professional knowledge and offering credits for attorneys, staff and other professionals.

    • Crisis Advisory

      Helping clients respond correctly when a crisis occurs.

    • DEI Strategic Services

      Providing our clients with legal, strategic, and practical advice to make transformational changes in their organizations.

    • eDiscovery

      Leveraging law and technology to deliver sound solutions.

    • Global Services

      Delivering seamless service through partnerships across the globe.

    • Innovation

      Leveraging leading-edge technology to guide change and create seamless, collaborative experiences for clients and attorneys.

    • IPED

      Industry-leading conferences focused on affordable housing, tax credits, and more.

    • Legal Project Management

      Providing actionable information to support strategic decision-making.

    • Legally Green

      Teaming with clients to advance sustainable projects, mitigate the effects of climate change, and protect our planet.

    • Nixon Peabody Trust Company

      Offering a range of investment management and fiduciary services.

    • NP Capital Connector

      Bringing together companies and investors for tomorrow’s new deals.

    • NP Second Opinion

      Offering fresh insights on cases that are delayed, over budget, or off-target from the desired resolution.

    • NP Trial

      Courtroom-ready lawyers who can resolve disputes early on clients’ terms or prevail at trial before a judge or jury.

    • Social Impact

      Creating positive impact in our communities through increasing equity, access, and opportunity.

    1. Home
    2. Insights
    3. Alerts
    4. Latest on the LIBOR transition frontAlerts

    Alert / Corporate Trust Alert

    Latest on the LIBOR transition front

    July 9, 2020

    Share

    By Erik Schneider

    It’s been a busy week on the LIBOR transition front. Trustees should take note of several key updates released by the Alternative Reference Rates Committee (“ARRC”), and also a statement by the Loan Syndications & Trading Association (“LSTA”) clarifying announcements made by certain members of the UK Financial Conduct Authority (“FCA”), and the UK Treasury regarding the timing of LIBOR’s cessation.

    It’s been a busy week for the Alternative Reference Rates Committee (“ARRC”), which released several key updates related to the LIBOR transition:

    1. its recommended “hardwire” fallback language for Syndicated Loans, thus revising the original hardwired fallback language released in April 2019; [1]
    2. its final recommended fallback language for new variable rate Private Student Loans [2] and conventions for using SOFR in Student Loans [3]
    3. its guidance entitled “Internal Systems and Processes: Transition Aid for SOFR Adoption,” which it describes as building upon its previous publications, “Users Guide to SOFR” (April 2019) and “Practical Implementation Checklist for SOFR Adoption” (September 2019), to support market participants in transitioning to SOFR as an alternative to USD LIBOR; [4] and
    4. further details regarding its recommendation of spread adjustments for cash products referencing U.S. dollar LIBOR. [5]

    In particular trustees and calculation agents should note that the Transition Aid for SOFR Adoption (no. 3 above) broadly classifies transition activities into the various categories, each with one-page summary of sub-topics, listing transaction activities for market participants to consider, as well as sections on upstream and downstream areas that may be affected by the transition. The summaries also identify dependencies that may influence the timing and sequence of transition activities.

    Likewise, the recommended spread adjustments (no. 4 above) provided two important technical details: for cash products other than consumer products, the ARRC’s recommended spread adjustment will match the value of ISDA’s spread adjustments to U.S. dollar LIBOR; and for all cash products, if a pre-cessation event is operative, the ARRC’s recommended five-year historical median spread adjustments will be determined at the same time as the ISDA’s spread adjustments, which will be at the time of any announcement that LIBOR will or has cease(d) or will or has become no longer representative.

    In addition, on July 8, 2020, the ARRC announced the launch of its “SOFR Summer Series,” a series of six (6) free webinars taking place in July and August designed to educate the market about the development and strengths of SOFR, progress made in transition away from LIBOR, and recommendations for ensuring readiness for the end of LIBOR.[6]

    LSTA publishes statement regarding possible FCA announcement in 2020 that LIBOR will end

    Separately, the Loan Syndications & Trading Association (“LSTA”) released a statement [7] clarifying some remarks made by certain members of the UK Financial Conduct Authority’s (“FCA”) and the UK Treasury, which some market participants interpreted to mean that LIBOR may end this year or that LIBOR might continue well past December 2021. The LSTA clarified that neither interpretation is correct. The confusion arose because although the FCA has stated that it will not require LIBOR panel banks to make LIBOR submissions beyond the end of 2021, there has been as yet, technically speaking, no official announcement that LIBOR will end as of a certain date. Market participants recognize, of course, that there should be no expectation of availability beyond the end of 2021. Trustees and calculation agents should note, however, that if and when the FCA makes such an official announcement, that would constitute a “benchmark transition event” under the ARRC’s and ISDA’s fallback language.


    1. https://www.newyorkfed.org/medialibrary/Microsites/arrc/files/2020/Updated-Final-Recommended-Language-June-30-2020.pdf [Back to reference]
    2. https://www.newyorkfed.org/medialibrary/Microsites/arrc/files/2020/Private-Student-Loan-Fallback-Language.pdf [Back to reference]
    3. https://www.newyorkfed.org/medialibrary/Microsites/arrc/files/2020/Options-For-Using-SOFR-in-Student-Loan-Products.pdf [Back to reference]
    4. https://www.newyorkfed.org/medialibrary/Microsites/arrc/files/2020/ARRC-Internal-Systems-Processes-Transition-Aid.pdf [Back to reference]
    5. https://www.newyorkfed.org/medialibrary/Microsites/arrc/files/2020/ARRC_Recommendation_Spread_Adjustments_Cash_Products_Press_Release.pdf [Back to reference]
    6. https://web.cvent.com/event/05640e3a-a92c-4d5c-b7ef-6758f8f404a4/summary?rp=00000000-0000-0000-0000-000000000000 [Back to reference]
    7. https://www.lsta.org/news-resources/libor-still-looking-at-2021-end-date/ [Back to reference]

    Practices

    Corporate & FinanceCorporate Trust

    Subscribe to stay informed of the latest legal news, alerts, and business trends.Subscribe

    • People
    • Capabilities
    • Insights
    • About
    • Locations
    • Events
    • Careers
    • Alumni
    • © 2023 Nixon Peabody. All rights reserved
    • Privacy Policy
    • Terms of Use
    • Statement of Client Rights
    • Supplier Diversity Program
    • Nixon Peabody International LLC
    • PAL