On March 2, 2020, the Federal Reserve Bank of New York (the “New York Fed”), as administrator of SOFR, began publishing 30-, 90-, and 180-day SOFR Averages as well as a SOFR Index. The SOFR Averages for a given publication date incorporate all the SOFR values starting exactly 30-, 90-, and 180-calendar days before the publication date, regardless of whether or not that date is a weekend or holiday, and extend through the SOFR published…

On February 26, 2020, the LSTA released a revised draft to its Compounded SOFR in Arrears “concept credit agreement”, which was initially released on October 1, 2019 (see a brief summary of the initial concept credit agreement).  In addition to bringing the concept credit agreement current with other LSTA form changes, the update addresses comments received from market participants on the initial draft: makes some adjustments to the “Compounded SOFR” definition to reflect comments…

Update: The Bank of England has delayed the introduction of increased haircuts to apply to all LIBOR linked collateral. For more details, please refer to our July 28 post. The FCA and the Bank of England (BoE) have encouraged market participants to switch from LIBOR to SONIA from March 2, 2020 in all new trades.  Some market participants have already started referencing RFRs.  For the year to date ending on March 6, 2020 the…

The LMA continues to encourage market participants to replace IBORs with RFRs as a reference rate in all contracts and make all necessary adjustments for using the RFRs as the standard benchmark. The LMA published exposure drafts of compounded SONIA and SOFR facilities agreements to enable market participants to consider certain structural issues related to the use of SONIA and SOFR in loan documentation. Once consensus is reached on certain issues, the LMA will publish…

Following the selection of alternative risk-free rates (RFRs) to replace each of the five LIBOR currencies: SOFR (for USD LIBOR), SONIA (for GBP LIBOR), SARON (for CHF LIBOR), TONAR (for JPY LIBOR) and €STR (for Euro LIBOR), ISDA launched consultations to obtain input from market participants on how to address the adjustments required as a result of the economic and term differences between LIBOR and RFRs. In November 2019 and February 2020, ISDA published the…

In a letter to the International Swaps and Derivatives Association (ISDA) on January 20, 2020, the Financial Conduct Authority (FCA) confirmed the possibility that LIBOR may continue to be published for a short period after regulators have announced that it is no longer representative of an underlying market (a non-representative LIBOR). The European Benchmarks Regulation could prohibit EU-supervised firms from entering into new derivatives transactions referencing such a non-representative LIBOR. As a result, the FCA…

Potential New York State Legislation The AARC has proposed a potential legislative solution aimed to reduce the adverse economic outcomes of legacy LIBOR fallbacks in contracts governed under New York law for all asset classes. (New York law is the chosen governing law for many financial agreements that use LIBOR as a reference.)  Such legislative solutions proposals were discussed at certain AARC meetings in 2019, but the proposal took more detailed form recently.  On March…