August 19, 2019

August 19, 2019

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LIBOR Replacement Language Published for Comment

The Alternate Reference Rates Committee, operating under the auspices of the Federal Reserve, has published two consultations concerning the replacement of the London Inter-bank Offered Rate (LIBOR) in financial contracts. One consultation deals with floating rate notes and the other deals with syndicated business loans. The consultations contain draft fallback provisions for contracts referencing LIBOR that are intended to minimize disruption when the calculation of LIBOR, in its current form, is discontinued or the rate is no longer usable as a practical matter.

The consultations assume that any replacement rate for LIBOR will be based on the secured overnight funding rate (SOFR) developed by the Committee, with appropriate adjustments for the term and credit factors inherent in LIBOR  that are not present in SOFR.

The drafts are not intended for use in practice until after comments resulting from the consultation have been considered and factored into the provisions. Comments are requested by November 8.

The consultations are available here:

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About this Author

Guy Dempsey Jr., Bank Regulations Legal Specialist, Katten Muchin
Partner

Guy C. Dempsey Jr. concentrates his practice on derivatives and structured products and on bank regulation. He advises clients on derivatives transactions of all types across all asset classes, as well as on the corporate governance, regulatory, collateral, compliance, insolvency and litigation issues associated with such products.

Much of Guy’s work involves helping bank and non-bank clients analyze the details and impact of the Dodd-Frank Act. He maintains deep knowledge of the banking laws and regulations relating to capital markets activities....

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