December 23, 2021 - In mid-December, the LSTA published a LIBOR Transition Checklist which addresses certain key considerations in the countdown to 2022 as market participants prepare for the next phase in LIBOR transition.
After December 31st, members need to be prepared for: (i) the cessation of all LIBOR settings for CHF and Euro, (ii) the cessation of all but 1-month, 3-month, and 6-month LIBOR settings for GBP and JPY, (iii) the publication of “synthetic” 1-month, 3-month, and 6-month LIBOR settings for GBP and JPY, (iv) the cessation of 1-week and 2-month USD LIBOR settings, and (v) no new contracts referencing any remaining USD, GBP and JPY LIBOR settings. This advisory, which has been vetted by the Primary Market Committee, serves as a “checklist” of key considerations in these final weeks, including:
- Alternative Reference Rate (ARR) Originations: Members should ensure that they are ready for non-LIBOR loan originations. You are strongly encouraged to confirm that your internal systems and processes are ready to handle the origination, servicing and trading of non-LIBOR loans. This includes confirming that required licensing arrangements are in place for ARRs and being prepared for the different pricing approaches that are used in SOFR loans.
- Best Practices for Amendments: Subject to the terms of the relevant credit agreement, lenders should be given five business days to review proposed amendments. Administrative agents are encouraged to share end of year plans with lenders in a timely fashion. Lenders are asked to be patient and recognize that communications may need to be made on a syndicate-wide basis.
- Notices: Administrative agents and sole lenders should be aware of the notice obligations set forth in their facilities.
- Rate Notices: It is critical that administrative agents who process rollover and reset notices, particularly the Operations teams, are aware of the LIBOR transition implications after the end of the year. These implications are discussed in detail in the advisory.
The LIBOR Transition Checklist can be accessed here.