As recent missives have suggested, considerable work on potential LIBOR succession is taking place. Helpfully, these efforts increasingly are being unveiled for public consumption. First, the Bank of England recently published a provisional timeline for SONIA, the Sterling Reference Rate. The timeline indicates there will be efforts to develop a term SONIA, which might be similar to term SOFR in the U.S. This is important because cash products like loans and securities need a term reference rate.
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Expert speakers offered a sneak peek into today’s terms for corporate borrowers, focusing on loans to BB borrowers, and compared terms to what are often seen in the investment grad and term loan B markets. To get more insight open to see the presentation which is available to our Members.
At the LSTA’s Annual Asia Conference swing this week, the major takeaway was that, while there are undeniable challenges in the long term, things look (fairly) rosy in the near term.
This week we cover LIBOR, LIBOR, LIBOR! Also: Volcker, Banking Bills, Cryptocurrencies & Blockchain
In the past week, both the LSTA and Bill Dudley, President of the Federal Reserve Bank of New York, exhorted finance professionals to pay attention to the potential end of LIBOR. While we recognize that Mr. Dudley speaks with more gravitas, below we highlight of the Fed speech and dive into the LSTA’s loan takeaways.
There are many things to do as the market prepares for a transition away from LIBOR. One of the first areas of focus is what happens in credit agreements if LIBOR ceases. As we discussed in the LSTA LIBOR Webcast on May 30th, for legacy deals, we encourage market participants to review 1) the long-term suitability of existing fallbacks in credit agreements and 2) the flexibility to amend agreements to select a new rate.
LIBOR potentially will cease after the end of 2021. Why may this happen, what might replace LIBOR…and what should loan market participants be considering? To get more insight open to see the presentation which is available to our Members.
LIBOR may well go away after the end of 2021 – and the $4.3 trillion U.S. syndicated loan market and the $500 billion CLO market must get ready. But there is considerable confusion about why LIBOR may end, what may replace it and what market participants should be doing to prepare. To help clear up the confusion, the LSTA has developed a series of Frequently Asked Questions (and answers).
Frequently Asked Questions on LIBOR
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