By Jacqueline Cook, Senior Knowledge Development Lawyer
The end of March has welcomed Spring, and this year it marks a new era for the financial markets, particularly for loans and financial products which would usually use Sterling LIBOR as the benchmark for calculation of interest, default interest or to calculate a discount rate. After 31 March 2021, alternative rates or benchmarks should be used in place of Sterling LIBOR.
Topics: SONIA, LIBOR, LIBOR replacement rate
While we are waiting on the LMA's Working Sub-Group on Transition Issues in Syndicated Loan Markets to produce draft provisions dealing with the transition to SONIA, their US counterpart, the Alternative Reference Rates Committee (ARRC) has already done so for SOFR, the US dollar risk free rate (RFR), in its recent consultation paper "Regarding More Robust LIBOR Fallback Contract Language for New Originations of LIBOR Syndicated Business Loans".
The ARRC's approach is likely to be influential for the LMA in relation to transitional drafting for USD (and potentially for other currencies as well in the interests of consistency). The highlights of the ARRC consultation paper include:
Topics: SONIA, ARRC, SOFR, RFR, LIBOR, LIBOR replacement rate, syndicated business loans
Ellis Lawson is a partner in the Trade & Export Finance Group in Sullivan's London office. He has extensive experience across a wide range of finance products and geographies, having spent significant portions of his career based both in London and in the Middle East and having advised on transactions across Europe, the Middle East and Africa. Ellis is also a speaker for Sullivan's Trade & Export Finance webinars.
