The LIBOR Calculator and the SOFR Calculator, as described in Reponses 3 and 4 below, (collectively the “Calculators”) are located on the LSTA website: (www.LSTA.org). The Calculators have been established as a service to LSTA Members to calculate the average London Interbank Offered Rate (LIBOR) and the average Secured Overnight Floating Rate (“SOFR”) for a given period of time. The Calculators provide a user with an average LIBO Rate or average SOFR for use in calculating “cost of carry” in accordance with Loan Syndications and Trading Association (LSTA) practices. The user inputs the date range, and the Calculators calculate the respective average LIBO Rate or average SOFR.
Yes, the average LIBO Rate and average SOFR generated by the Calculators satisfy the “Cost of Carry Rate” that has been set forth in the LSTA Standard Terms and Conditions for Primary Allocations, Par/Near Par Trade and Distressed Trade Confirmations, as revised from time to time, (the “STCs”). LSTA Trade Confirms must support the trading of all syndicated loans. As the USD loan market transitions from utilizing the LIBOR benchmark to other rates, typically SOFR, it became evident that calculating cost of carry based on the average LIBO Rate would no longer be effective and yet calculating cost of carry based on different underlying benchmarks would be cumbersome and suboptimal. Therefore, for trades entered into on and after December 1, 2021, the LSTA updated Section 6 of the STCs to have a single cost of carry calculation that will utilize one “Cost of Carry Rate”, including a static spread adjustment, regardless of the underlying benchmark or currency of the facility traded. Below please find the revised definition of “Cost of Carry Rate”.
Cost of Carry Rate means, for the Delay Period (i) (a) the sum of all the individual daily simple SOFRs for each day in the period from (and including) the date two (2) Business Days before the Commencement Date and to (but excluding) the date that is two (2) Business Days before the Delayed Settlement Date divided by (b) the total number of days in such period plus (ii) a spread adjustment equal to 11.448 basis points.
According to the prior version of the STCs which were made effective for trades entered into on or after September 13, 2021 but prior to December 1, 2021:
Cost of Carry Rate means, for the Delay Period:
(i) if the Debt references (a) a LIBO Rate or (b) an “Alternate Base Rate” or “ABR” as defined in the Credit Agreement as the applicable benchmark rate of interest as of the last day of the Delay Period, (1) the sum of all the individual 1M-LIBO Rates for each day in the period from (and including) the date two (2) Business Days before the Commencement Date and to (but excluding) the date that is two (2) Business Days before the Delayed Settlement Date (2) divided by the total number of days in such period;
(ii) if the Debt references a Risk-Free Rate (“RFR”)-based rate as the applicable benchmark rate of interest as of the last day of the Delay Period, (a) the sum of all the individual applicable RFRs for each day in the period from (and including) the date two (2) Business Days before the Commencement Date and to (but excluding) the date that is two (2) Business Days before the Delayed Settlement Date (b) divided by the total number of days in such period;
(iii) If the Debt references a benchmark rate other than one described in clause (i) or (ii) above (including, but not limited to, a Credit Sensitive Rate) as the applicable benchmark rate of interest as of the last day of the Delay Period, (a) the sum of all of the individual RFRs applicable for the LIBO Rate Currency in which the Debt is denominated for each day in the period from (and including) the date two (2) Business Days before the Commencement Date and to (but excluding) the date that is two (2) Business Days before the Delayed Settlement Date (b) divided by the total number of days in such period; and
(iv) if the Debt references both a LIBO Rate and one or more of any other benchmark rate described in clause (ii) or (iii) as applicable benchmark rates of interest as of the last day of the Delay Period, (a) the sum of all the individual applicable RFRs for each day in the period from (and including) the date two (2) Business Days before the Commencement Date and to (but excluding) the date that is two (2) Business Days before the Delayed Settlement Date (b) divided by the total number of days in such period.
For purposes of clauses (ii), (iii) and (iv), with respect to a Multi-Currency Commitment, the applicable RFR shall be the RFR in the Master Currency.
As required by the STCs, the LIBOR Calculator uses the 1-month US dollar LIBO Rate published by ICE Benchmark Administration. For any given period, the LIBOR Calculator takes the arithmetic mean of the LIBO Rate for each day in the period. For any day that the ICE Benchmark Administration does not publish a LIBO Rate, the previous day’s rate is used. For example, LIBOR is not published on weekends, so the rate for Saturday and Sunday is Friday’s rate. For any weekday holiday on which LIBOR is not published, the last published LIBO Rate is used for that day.
As required by the STCs, the SOFR Calculator uses the daily simple SOFR published by the New York Fed on the New York Fed website at approximately 8:00 a.m. ET setting forth the rate for the prior Business Day. For any given period, the SOFR Calculator takes the arithmetic mean of the SOFR for each day in the period. For any day that the New York Fed does not publish a SOFR, the previous day’s rate is used. For example, SOFR is not published on weekends, so the rate for Saturday and Sunday is Friday’s rate. For any weekday holiday on which SOFR is not published, the last published SOFR is used for that day.
“Cost of Carry” is calculated for the period from (and including) the Commencement Date to but excluding the Delayed Settlement Date (the “Delay Period”). The Commencement Date is the first day of the Delay Period, as respectively defined in the STCs. The Delayed Settlement Date, as defined in the Standard Terms, means the date following the Commencement Date on which settlement of the transaction occurs.
As required by the earlier version of the STCs, the “Cost of Carry Rate”, for debt that references a LIBO Rate as the applicable benchmark rate of interest for the calculation as of the last day of the Delay Period, is the sum of the individual LIBO Rates in the period from (and including) the date two (2) Business Days before your Commencement Date and to (but excluding) the date that is two (2) Business Days before your Delayed Settlement Date, divided by the total number of days in this period. When using the LIBOR Calculator, you will type in the following two dates: (1) the date which is two (2) Business Days before the Commencement Date and (2) the date that is two (2) Business Days plus one more day before the Delayed Settlement Date. For example, if your Commencement Date is Thursday, April 7th and you are closing on Friday April 22nd, then input April 5th and April 19th into the LIBOR Calculator. The LIBOR Calculator will generate average LIBO Rate for April 5th through April 19th, per the definition in the STCs, as the sum of the individual LIBO Rates will be divided by the 15 days in this range. While this date range is used to calculate the average LIBO Rate, it is important to remember that under the STCs, when you calculate “Compensation for Delayed Settlement” you apply the average LIBO Rate for the actual number of days in the Delay Period, which may vary, given that the rates were determined by looking back.
Similarly, under the STCs, trades that apply SOFR for the “Cost of Carry” calculation, will calculate the “Cost of Carry Rate”, by taking the sum of the individual SOFRs in the period from (and including) the date two (2) Business Days before your Commencement Date and to (but excluding) the date that is two (2) Business Days before your Delayed Settlement Date, divided by the total number of days in this period. We have aimed to simplify this process and therefore when using the SOFR Calculator you should type in the following two dates: (1) the Commencement Date and (2) the Delayed Settlement Date. For example, if your Commencement Date is Thursday, April 7th and you are closing on Friday April 22nd, then input April 7th and April 22nd into the SOFR Calculator. The SOFR Calculator will generate average SOFR for April 5th through April 19th, per the definition in the STCs, as the sum of the individual SOFRs will be divided by the 15 days in this range. By entering the Purchase Price on the Commencement Date, the SOFR Calculator will automatically calculate the “Cost of Carry” amount. It is again worth noting that by looking back to access the daily rates, the date range that is used to calculate the average SOFR may not be the same as the number of days in the Delay Period.
ICE Benchmark Administration LIBOR is determined every business morning in London by ICE Benchmark Administration Limited. The ICE Benchmark Administration expects to continue to determine and publish the 1-month USD Libor settings using panel bank contributions and the “panel bank” Libor methodology until the end of June 2023.
The SOFR is published by the Federal Reserve Bank of New York (New York Fed) on https://www.newyorkfed.org/markets/reference-rates/sofr at approximately 8:00 a.m. ET. The SOFR is calculated as a volume-weighted median of transaction-level tri-party repo data collected from the Bank of New York Mellon as well as GCF Repo transaction data and data on bilateral Treasury repo transactions cleared through FICC’s DVP service, which are obtained from DTCC Solutions LLC, an affiliate of the Depository Trust & Clearing Corporation.
With respect to trades entered into prior to December 1, 2021, the “Cost of Carry” for USD loans that reference a LIBO Rate as the applicable benchmark rate of interest is calculated by multiplying the average LIBO Rate for the stated period by the Purchase Price calculated on the Commencement Date, then multiplying this product by a fraction the numerator of which is the number of days in the Delay Period and the denominator of which is 360. For all GBP loans the denominator of 365/366 is used. For purposes of the Calculators, we assume that there have been no commitment decreases and that the Purchase Price on the Commencement Date remains unchanged as of the Delayed Settlement Date; otherwise, it would be necessary to adjust the cost of carry calculation per the STCs. The “Cost of Carry” is generated for informational purposes and each user should independently verify the actual “Cost of Carry” due under any particular transaction (see response 14 below).
With respect to all trades entered into on and after December 1, 2021 or with respect to trades entered into prior to December 1, 2021, that pursuant to the STCs, should calculate “Cost of Carry” based on SOFR, the “Cost of Carry” is calculated by multiplying the average SOFR for the stated period by the Purchase Price calculated on the Commencement Date, then multiplying this product by a fraction the numerator of which is the number of days in the Delay Period and the denominator of which is 360. For purposes of the Calculators, we assume that there have been no commitment decreases and that the Purchase Price on the Commencement Date remains unchanged as of the Delayed Settlement Date; otherwise, it would be necessary to adjust the “Cost of Carry” calculation per the STCs. The “Cost of Carry” is generated for informational purposes and each user should independently verify the actual Cost of Carry due under any particular transaction (see response 14 below).
The LSTA is not an affiliate, partner, joint venturer, agent, or employee of the ICE Benchmark Administration. The LSTA is an official ICE Benchmark Administration licensee of LIBOR data
The LSTA is not affiliated with the New York Fed. The New York Fed does not sanction, endorse, or recommend any products or services offered by the LSTA.
ICE BENCHMARK ADMINISTRATION LIMITED (IBA) MAKES NO WARRANTY, EXPRESS OR IMPLIED, EITHER AS TO THE RESULTS TO BE OBTAINED FROM THE USE OF ICE LlBOR AND/OR THE FIGURE AT WHICH ICE LlBOR STANDS AT ANY PARTICULAR TIME ON ANY PARTICULAR DAY OR OTHERWISE. ICE BENCHMARK ADMINISTRATION LIMITED MAKES NO EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE IN RESPECT OF ANY USE OF ICE LIBOR. IBA IS NOT RESPONSIBLE FOR AND MAKES NO REPRESENTATION REGARDING THE APPROPRIATENESS OR SUITABILITY OF USING, OR INVESTING IN ANY FINANCIAL INSTRUMENT OR ENTERING INTO ANY CONTRACT LINKED TO IBA’S BENCHMARK OR OTHER INFORMATION AND ANY DECISION TO ENGAGE IN SUCH USE OR TO INVEST IN ANY SUCH INSTRUMENT OR ENTER INTO ANY SUCH CONTRACT SHOULD NOT BE MADE IN RELIANCE ON IBA’S BENCHMARK OR OTHER INFORMATION.
THE SECURED OVERNIGHT FINANCING RATE IS SUBJECT TO THE TERMS OF USE POSTED AT NEWYORKFED.ORG. THE NEW YORK FED IS NOT RESPONSIBLE FOR PUBLICATION OF THE SECURED OVERNIGHT FINANCING RATE BY THE LSTA, DOES NOT SANCTION OR ENDORSE ANY PARTICULAR REPUBLICATION, AND HAS NO LIABILITY FOR YOUR USE.
YOU UNDERSTAND, ACKNOWLEDGE AND AGREE, THAT USE OF THE SERVICES IS AT YOUR SOLE RISK; THAT THE SERVICES ARE PROVIDED “AS IS;” AND THAT, TO THE FULLEST EXTENT PERMISSIBLE BY LAW, THE LSTA DOES NOT WARRANT, AND EXPLICITLY DISCLAIMS ANY WARRANTY OR REPRESENTATIONS OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, REGARDING YOUR USE OF THE SERVICES, INCLUDING THE ACCURACY, COMPLETENESS, NON-INFRINGEMENT, TIMELINESS OR ANY OTHER CHARACTERISTIC OF THE SERVICES, OR THE RESULTS TO BE OBTAINED FROM THE USE OF THE SERVICES, OR THE FIGURE AT WHICH ANY CONTENT STANDS AT ANY PARTICULAR TIME ON ANY PARTICULAR DAY OR OTHERWISE. ALL CONTENT CONTAINED WITHIN OR PRESENTED ON THE CALCULATIONS SHOULD BE CONSIDERED AS A REFERENCE ONLY. SOME STATES DO NOT ALLOW US TO EXCLUDE CERTAIN WARRANTIES. IN THOSE STATES, AND THE LSTA’S WARRANTIES ARE LIMITED TO THE EXTENT PERMITTED BY LAW.
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The Calculators are complimentary for LSTA members. If you do not have a login and your firm is a member of the LSTA, please contact us and one will be created for you.
