In a significant step for the transition from LIBOR, the Alternative Reference Rates Committee ("ARRC") requested feedback on two consultations on U.S. dollar LIBOR fallback contract language for floating rate notes and syndicated business loans.
The consultations provide draft language for new contracts that reference LIBOR in order to ensure that these contracts will continue to be effective if LIBOR is no longer used. A primary goal of these consultations, which will be followed by consultations for other cash products, is to produce fallback provisions that are as consistent as possible across multiple markets, while recognizing the unique needs and practices of each.
In particular, the consultation on fallbacks for floating rate notes proposed specific trigger events and a "waterfall" for determining the replacement rate and spread adjustment that would become effective in various scenarios. The consultation on fallbacks for syndicated business loans proposed two approaches: (i) a hardwired approach (which is similar to the floating rate note approach) and (ii) a much simpler amendment approach, which includes a streamlined amendment mechanism that could serve as the first step toward a hardwired approach.
Feedback must be submitted no later than November 8, 2018.
Cadwalader, Wickersham & Taft LLP represented the ARRC in the development of the consultations.
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