This Client Alert summarizes key announcements made on March 5, 2021 regarding the transition away from the US dollar (“USD”) London Interbank Offered Rate (“LIBOR”) and highlights their impact on the terms of certain transaction types.
The Announcements
On March 5, 2021, announcements were made by LIBOR’s regulator, the Financial Conduct Authority (the “FCA”) and LIBOR’s administrator, ICE Benchmark Administration Limited (the “IBA”) regarding precisely when LIBOR panels will end. These announcements are important for several reasons:
- They serve as a likely trigger event (“Trigger Event”) for recommended fallback language (in both the amendment approach and the hardwired approach, described below) issued by the Alternative Reference Rates Committee (“ARRC”) – as well as for many other variants of fallback language in credit agreements.
- The International Swaps and Derivatives Association, Inc. (“ISDA”) has confirmed that these announcements constitute an “Index Cessation Event” under the IBOR Fallbacks Supplement (Supplement Number 70 to the 2006 ISDA Definitions) (the “IBOR Supplement”) and the ISDA 2020 IBOR Fallbacks Protocol (the “ISDA Protocol”), which in turn triggers a “Spread Adjustment Fixing Date” under the Bloomberg IBOR Fallback Rate Adjustments Rule Book (“Bloomberg Rule Book”), providing clarity on future terms of the numerous derivative contracts which incorporate the fallbacks set out in the IBOR Supplement and ISDA Protocol.
To read the full We've Come So Far, SOFR client alert, please click here.
