3.8.21
On March 5, the UK Financial Conduct Authority (FCA) and ICE Benchmark Administration (IBA) announced that the cessation of most LIBOR settings will take place at the end of this year. In response, Alternative Reference Rates Committee (ARRC) Chairman Tom Wipf stated, “The end of this long transition road is clear. We now know when a representative USD LIBOR will end and what its associated spread adjustments will be in no uncertain terms.”
Following the announcement, the ARRC in its released FAQs, confirmed the move constitutes a “Benchmark Transition Event” with respect to all USD LIBOR settings under ARRC-recommended fallback language for new issuances or originations of LIBOR floating rate notes, securitizations, syndicated business loans, and bilateral business loans. The date of cessation or declaration of non-representativeness serves as the “Benchmark Replacement Date” under ARRC-recommended language, and so, transition will not be effectuated until such future date. This week’s announcement provides welcome clarity on the endgame for LIBOR and helps pave the way for market participants’ transition to SOFR and other alternative rates.