May 12, 2021 - by Tess Virmani and Meredith Coffey. With less than eight months to go until LIBOR originations are expected to end and LIBOR settings begin to cease, there is a lot of work to be done! To help members as they execute their transition plans, the LSTA has developed a number of documentation tools and resources.

The LSTA now has a complete suite of Daily SOFR (and Daily RFR) Concept Documents. These documents illustrate various types of SOFR-based US Dollar credit facilities and risk-free rate (“RFR”)-based multicurrency credit facilities which use a daily, in arrears benchmark. These documents have been prepared and are offered as educational tools and do not purport to reflect any established market practice. Each document is described briefly below; please contact Tess Virmani for more information:

• Daily Simple SOFR Concept Document: This document is an illustrative example of a Daily Simple SOFR referenced credit agreement for a term loan facility denominated in Dollars. Alternatively, this document provides an illustrative example of a Daily Compounded SOFR referenced credit agreement where interest is computed daily using the “compound the balance” approach, i.e. interest is applied daily to outstanding principal and accrued interest.

• Daily Compounded SOFR Concept Document: This document is an illustrative example of a Daily Compounded SOFR referenced credit agreement for a term loan facility denominated in Dollars. The credit agreement provides for interest to be computed daily using the “compound the rate” approach. The “compound the rate” (or Non-Cumulative Compounded Rate (NCCR)) approach computes interest according to a compounding formula set out in the credit agreement.

• Daily RFR Multicurrency Concept Document: This document is an illustrative example of an RFR referenced credit agreement with interest computed on a simple basis. This credit agreement is for a revolving loan facility (with optional drafting for a term loan facility) with borrowings denominated in Dollars as well as Euro, Japanese Yen, Sterling, and Swiss Franc. Alternatively, this document also provides an illustrative example of offering RFR-referenced loans for Dollars, Sterling and Swiss Francs, but EURIBOR-referenced loans for Euros and TIBOR-referenced loans for Yen.

• IBOR/RFR Multicurrency Concept Document:  This document is an illustrative example of a credit agreement for a similar multicurrency facility that instead provides for Daily Simple RFR referenced loans denominated in Sterling and Swiss Francs and USD LIBOR-referenced loans for Dollars, EURIBOR-referenced loans for Euros and TIBOR-referenced loans for Yen. It contains a mechanism for automatically transitioning to a spread-adjusted Daily Simple RFR (SOFR) or Term RFR (SOFR), as applicable, upon certain transition events.

In addition, recognizing that it is very challenging for members to stay up to date on information in this fast-moving transition away from LIBOR, we have prepared a single source or “library” of relevant LSTA and ARRC resources – the LSTA Library for the LIBOR Transition.  We will continue to update the library as necessary and hope that this serves as a useful tool.  In addition, a friendly reminder that we hold weekly LIBOR Q&A calls every Monday at 3pm ET for all members. Please feel free to join with your questions which can be sent in advance to LIBORInformation@lsta.org.