fsolegal.com
legal pad.jpg

Briefs

fsolegal.com
briefs


Search For Past Briefs

 
 
 

 

The End is Near: Is Your Bank Ready for the End of LIBOR?

The London Interbank Offered Rate (LIBOR) has been the leading global benchmark interest rate for some time. However, at the end of 2021, LIBOR will likely no longer exist and will be replaced with a new benchmark interest rate in the United States – the Secured Overnight Financing Rate (SOFR). Between now and the end of 2021, it is expected that use of the LIBOR interest rate will phase out and be replaced with SOFR or another interest rate index. This will potentially have the greatest impact on floating rate loans, which are more likely to use an interest rate index such as LIBOR. Lenders need to make sure that loan documents with maturity dates that extend beyond 2021 are using a replacement interest rate or that the interest rate language in their loan documents contains provisions for selecting a replacement interest rate once LIBOR ends. Lenders should review loan documents to determine which loans are tied to LIBOR and what language already exists in documents regarding a replacement interest rate. If no language exists or if the mechanism for choosing a replacement interest rate would result in a rate that is unsatisfactory, then lenders should consider amending these provisions either with an amendment to the loan documents or upon the next renewal.