August 18, 2020 - As the LSTA has reported, this summer has been a busy time on the LIBOR transition front with two important ARRC publications, whose development was led by the LSTA: the updated hardwired fallback language in June and recommended conventions for syndicated loans in July.  These publications pave the way to meet the ARRC recommended best practice of incorporating hardwired fallback language in loan originations by the end of September. (These publications are covered in detail in this recent LSTA webcast.)

Looking forward, the LSTA’s work on the concept credit agreements continues and we are kicking off a new project aimed at developing forms of amendment that will be necessary in the transition away from LIBOR. As we know, upon LIBOR’s phase-out, it is foreseeable that a great number of loans will need to be amended in short order. (Indeed, this is a principal reason that hardwired fallback language, which does not require an amendment process, is a safer transition approach.) In order to address the sheer scale of amendments with which the market could be faced, having an industry accepted form of amendment available as a transition tool for members will be valuable. At this time, we contemplate developing forms of amendment designed for amending loans with amendment approach fallback language as well as forms of notice of conforming changes designed to be used in connection with hardwired fallback language, focusing on the current ARRC waterfall of rates, i.e. Term SOFR and Daily Simple SOFR. While hardwired fallback language will not require an amendment process in a transition away from LIBOR, illustrating the conforming changes that may be implemented upon transition away from LIBOR will be helpful to members as they look to include hardwired fallback language into their loan originations and refinancings in line with the ARRC’s recommended best practice.

For more information about the project, please contact Tess Virmani.