March 31, 2022 - The LSTA has released drafts of an initial suite of amendment forms to assist in the remediation of LIBOR loans. These forms were developed at the request of members and are designed to modify a credit agreement to replace LIBOR with Term SOFR and address a number of scenarios as described below. The Conforming Changes Amendment and Replacement Amendment represent a set of generic, “one size fits all” amendment documents that serve as a blunt tool to remediate legacy contracts en masse. In contrast, based on member discussions, it seems that many members plan to use traditional, tailored amendments if the credit agreement to be amended does not include LIBOR replacement language. To that end, we have also developed a form suitable for that use.
Forms of Amendment:
- Conforming Changes Cover Amendment: The Conforming Changes Cover Amendment is a cover faceplate applicable to implement Benchmark Replacement Conforming Changes unilaterally (without borrower or lender affirmative consent) and is accompanied by Exhibit A/Operative Terms which contains the operative terms to implement Adjusted Term SOFR. It can be used either with an Amendment Approach Fallback (if another implementing document has been utilized to convey the replacement benchmark selection) or with a Hardwired Approach Fallback. It is executed only by the Administrative Agent and no consents are necessary.
- Benchmark Replacement Cover Amendment: This is an integrated form for usage with ARRC-style amendment approach provisions. It both selects the replacement rate of Adjusted Term SOFR (for an amendment approach) and incorporates, as an exhibit, the conforming changes necessary to implement the replacement rate. It is executed by the Administrative Agent, the Borrower and the Loan Parties, and is typically subject to negative consent of the Required Lenders. The Benchmark Replacement Cover Amendment plus the Exhibit A/Operative Terms together document the amendment to replace LIBOR with Term SOFR. A blackline against the Conforming Changes Amendment has been included for ease of review.
- Operative Terms / Exhibit A: These provisions implement Adjusted Term SOFR and are suited to accompany either the Conforming Changes Cover Amendment or Replacement Cover Amendment.
- Term SOFR Consensual Amendment: This is an amendment that would allow parties to attach a conformed, blacklined credit agreement as Exhibit A to change a benchmark rate. In this way it is different from the other two cover forms which both are accompanied by the Operative Terms document. This amendment is for usage for a “standard” or “consensual” amendment (typically executed by the Administrative Agent, the Borrower, the Loan Parties and 100% of Lenders), and does not utilize standard fallback provisions. A blackline against the Conforming Changes Amendment has been included for ease of review.