November 29, 2018 - On September 24th ARRC released a market consultation on LIBOR fallback contract language for new originations of LIBOR syndicated business loans. On Monday, the comment period closed and the next phase of work – crafting ARRC’s final recommendation based on the feedback received – is soon to begin. The LSTA intends to publish a preliminary analysis of the comments received once they are publicly available. Readers of the LSTA Week in Review are undoubtedly familiar with the proposals in the ARRC consultation (and past coverage of the consultation is available here), but the consultation proposed two approaches for syndicated business loans – an amendment approach and a hardwired approach – and set forth proposed contract language for each approach. The amendment approach improved upon the language that is currently being seen in new syndicated loans, while the hardwired approach represented a further step in the transition process. The hardwired approach anticipates the transition from LIBOR and sets all the terms for that transition at the origination of the credit agreement (thus generally avoiding the need for an amendment). The ARRC consultation asked 25 questions of market participants. The most fundamental question being, of course, which approach respondents considered to be the appropriate ARRC policy. The feedback received will inform the ARRC’s recommended LIBOR fallback language for credit agreements, which is expected in early 2019, and represents an important step in an orderly transition from LIBOR.
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