March 10, 2021 - Today the LSTA published its form of notice of the IBA and FCA announcements relating to LIBOR transition.

On March 5th the IBA announced and the FCA confirmed the IBA’s announcement that all LIBOR settings will either cease to be provided by any administrator or no longer be representative. This will occur immediately after December 31, 2021, in the case of all GBP, Euro, CHF and JPY LIBOR settings, and in the case of 1-week and 2-month USD LIBOR settings; and immediately after June 30, 2023, in the case of the remaining USD LIBOR settings. While this announcement confirms that most tenors of USD LIBOR will continue past year-end 2021 for legacy contracts, the US Banking Regulators have stated that they believe the use of USD LIBOR after December 31, 2021 presents safety and soundness risks and banks will be examined on that basis.

ARRC fallback language – as well as some other variants of fallback language – impose notice obligations on administrative agents and sole lenders if a trigger event under the fallback language occurs. The LSTA’s form of notice is drafted to be a simple, generic notice that is designed to be suitable for use by administrative agents and sole lenders to notify relevant transaction parties of the March 5th statements made by the IBA and FCA.  This form of generic notice is designed to satisfy customary notice requirements in fallback language contained in credit agreements and notes without reference to specific defined terms in the relevant credit agreement or note. The notice is intended to align with the ARRC’s FAQs Regarding the Occurrence of a Benchmark Transition Event and ensure that the notice sets forth a complete picture of the March 5th announcements. The LSTA clearly is not able to address all permutations of LIBOR fallback language that have been adopted in the market. However, members should consider that if they are the administrative agent under a credit agreement or the sole lender under a credit agreement or note where the notice itself might inadvertently operate to actively transition to replacement rates, such party providing the notice may wish to include language that the notice serves only to notify parties of the announcements and is not intended to, nor does it operate to, transition the relevant contracts to replacement rates at this time.

Members should note that the development of this form is not a recommendation of any planned course of action and each institution must decide for itself whether to use this form in connection with its performance of any notice obligations.

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