ARRC recommends replacement references for certain LIBOR contracts


The Alternative Reference Rates Committee, acting as the “competent recommending body” under the LIBOR legislation enacted in New York and Alabama, formally selected and recommended alternative benchmarks, based on the rate of. guaranteed day-to-day financing to replace the 1-week and 2-month US dollar. LIBOR in contracts that fall within the scope of these two state laws. The ARRC also selected and recommended spread adjustments and conforming changes to accompany these replacement benchmarks.

These selections and recommendations apply to contracts governed by New York or Alabama law that do not have a fallback solution for LIBOR or that choose to take advantage of the Articles of Association’s optional safe harbor. Selections and recommendations vary by product type and are broken down by category, including asset-backed securities, business loans, consumer products, and floating rate notes. In addition to these formal selections and recommendations, the ARRC has also published a set of FAQs that clarify the scope and application of these state LIBOR laws.

Tom Wipf, ARRC President, said:

“The end is near, with only a month before the absence of new LIBOR and the cessation of these two LIBOR tenors in USD. The LIBOR endgame has long been clear, and today’s recommendations are important for legacy contracts that rely on these tenors. “

Remark

The publication by the ARRC of the recommended benchmark replacements for one-week and two-month LIBOR tenors is an important step in the LIBOR transition. Just a few years ago, the ARRC was formed to help plan the LIBOR transition and reduce uncertainty about how that transition will unfold. Now the state-level legislation defended by the ARRC has been passed, and these recommended benchmark replacements provide a solution for contracts that rely on these grades and have not adequately planned for the LIBOR transition, which is a major step towards facilitating the LIBOR transition. and reduce uncertainty.

Primary sources

  1. ARRC press release: ARRC issues statutory fallback recommendations for 1 week and 2 month USD LIBOR contracts

  2. ARRC Statement: Statement as a “competent recommending body” under state LIBOR legislation with respect to 1 week and 2 month USD LIBOR tenors

  3. ARRC FAQs: New York State LIBOR Law

© Copyright 2021 Cadwalader, Wickersham & Taft LLPRevue nationale de droit, volume XI, number 340


Comments are closed.