October 26, 2022 - Do you have loans? Do you trade them? Then you need to calculate Average SOFR for Cost of Carry for the purposes of delayed compensation. Well, good news! Today, the LSTA is pleased to announce that a CALCULATOR, programmed to compute the Cost of Carry Rate using the average of the individual daily SOFRs during the delay period, is now accessible on the LSTA website. This new member benefit will be a tremendous time-saver, providing fast and accurate daily average SOFR rate results.   

Whether you are calculating this amount from scratch or verifying the cost of carry amount (as computed by your internal software or an electronic settlement platform), this calculator will save you time and effort as you settle primary allocations, par/near par trades, and distressed trades.  

Background:

To support the LIBOR transition, last year the LSTA published revised versions of the Standard Terms and Conditions for the Primary Allocation Confirmation, Par Confirmation and Distressed Confirmation to state that there would be ONE cost of carry calculation for trading in ALL loans, regardless of the underlying benchmark of the facility being traded.  

The Cost of Carry Rate for trades entered into beginning December 1, 2021, isequal to (a) the sum of all the individual daily simple SOFRs 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 (c) plus the spread adjustment equal to 11.448 basis points (the ARRC’s one-month spread adjustment).

How the SOFR Calculator Works:

To obtain average SOFR, enter two dates:  

1-the “start date” on which delayed compensation begins (the “Commencement Date”)

2- the “end date” on which the trade settles (“Delayed Settlement Date”)

The Calculator, programmed to account for the lookback days, will determine the Cost of Carry Rate inclusive of a spread adjustment of 11.448 basis points.  By further inputting the purchase price on the Commencement Date, the calculator will determine the cost of carry amount to be included in the funding memo or purchase price letter.

AverageLIBOR has moved:

Since trades entered into prior to December 1, 2021, continue to be governed by the trading documents that were effective on their respective trade dates, if you were accustomed to generating the average of the one-month LIBOR rates on Averagelibor.com, this capability has been moved to the LIBOR Calculator.

How to Access the Calculators:

Both the LIBOR and SOFR Calculators are available on the Calculators page by using your existing LSTA username and password.    We hope that adding this SOFR functionality to our website will carry you through to an easier settlement.   Please contact ehefferan@lsta.org if you have questions.   (And don’t forget to remediate your legacy LIBOR portfolio!)

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