March 31, 2021 - Today the LSTA published its Simple RFR Multicurrency Concept Document. This concept document was developed, in collaboration with the LSTA’s Primary Market Committee, as a helpful tool for members as they adopt post-LIBOR documentation, particularly in light of the Working Group on Sterling Risk-Free Reference Rates milestone of no new Sterling LIBOR-referenced loans (and other instruments).
This concept document generally illustrates a syndicated loan referencing the relevant risk-free rate (RFR) for each currency contemplated in the document (USD, Sterling, Euro, Japanese Yen and Swiss Franc) and applies that rate on a simple, daily basis. However, the concept document provides alternative drafting for using EURIBOR and TIBOR for Euro and Yen, respectively, if parties wish to do so. The concept document also provides optional drafting for including a flip forward to a term version of the relevant RFRs if certain conditions are met. Footnotes highlighting important considerations for parties interested in incorporating the “flip forward” construct can be found in the definition of “Term RFR Transition Event”.
In addition, the concept document includes new language in the definition of “Daily Simple RFR”. We now understand that the Federal Reserve Bank of New York may infrequently decide to diverge from the SIFMA calendar and not publish SOFR on a particular day if certain conditions are met. Good Friday on April 2nd is one such example. To address this, the definition of “Daily Simple RFR” now includes additional language to clarify that if SOFR, for example, is not published for a given RFR Business Day, SOFR of the preceding RFR Business Day would be used, e.g., Thursday’s SOFR would be used for Friday. This construct would allow for this temporary “last print” feature to apply for three RFR Business Days (or as agreed by the parties). Similarly, the language contemplates that SOFR for a given day may not be published on the next succeeding RFR Business Day, e.g., this Thursday’s SOFR will be published on Monday instead of Friday, but Thursday’s rate can still be used.
As new multicurrency facilities referencing “Daily Simple RFR” are originated, we will monitor developments with respect to drafting and conventions and update our concept document as appropriate. Similarly, we are currently updating the Daily Simple SOFR Concept Document and draft Daily Compounded SOFR Concept Document to reflect developments in how SOFR is being implemented.
Please contact Tess Virmani for further information.