Life After LIBOR: Amending Existing Mortgage Instruments, Fallback Language, SOFR and Spread Adjustments
Adjustable Interest Rate (LIBOR) Act, LSTA Amendment Forms, CFPB's Interim Final Rule
Recording of a 90-minute premium CLE video webinar with Q&A
This CLE webinar will discuss the steps real estate counsel must take now to amend existing credit agreements tied to LIBOR to transition appropriately to a new benchmark rate. LIBOR became discontinued on June 30, 2023. The expectation by regulatory agencies is that institutions need to ensure that replacement alternative rates are negotiated where needed and in place by June 30, 2023, for all LIBOR-referencing contracts including investments, derivatives, and loans. However, many institutions will not have satisfied this requirement by the deadline, and there exists a large backlog of loans that continue to use LIBOR as the benchmark rate. The panel will discuss issues to consider in implementing an alternative rate and best practices for incorporating fallback language into those legacy agreements as well as form documents for future transactions. The panel will also discuss the Adjustable Interest Rate (LIBOR) Act and the legacy contracts to which it applies.
Outline
- LIBOR: timeline for the phaseout
- Alternative reference rates
- ARRC recommended SOFR and term SOFR rates by product
- Credit-sensitive alternatives
- Spread adjustments
- Impact on interest rate swaps
- ISDA IBOR Fallbacks Protocol
- 2021 ISDA Interest Rate Derivative Definitions
- Relying on CME Term SOFR in swap markets
- Impact on loans
- Timing of amendments and rate switch
- Next steps for loans that incorporated the ARRC recommended fallback provisions
- Basis risk
- Special considerations for hedged loans
- The Adjustable Interest Rate (LIBOR) Act
- Federal Reserve rules implementing LIBOR Act
- Preemption of state law
- The CFBP’s interim final rule amending Regulation Z to address the anticipated sunset of LIBOR
- Where are we in the transition process and what are the key focus areas?
- What do you need to know about the myriad of alternative rates?
- What should your clients consider in addressing the timing and process of amending legacy instruments?
- How does the Adjustable Interest Rate (LIBOR) Act address contracts without fallback provisions?
- What does the likely publication of synthetic LIBOR mean for loans not covered by the LIBOR Act?
- Impact on securities
- Impact on loans
- Synthetic LIBOR
- LSTA amendment forms
- Implementation challenges
Benefits
The panel will review these and other key issues:
- Where are we in the transition process and what are the key focus areas?
- What do you need to know about the myriad of alternative rates?
- What should your clients consider in addressing the backlog in amending legacy instruments?
- How does the Adjustable Interest Rate (LIBOR) Act address contracts without fallback provisions?
Faculty
Cheryl L. Isaac
Partner
K&L Gates
Ms. Isaac advises a broad range of derivatives market participants - exchanges, financial institutions, asset managers,... | Read More
Ms. Isaac advises a broad range of derivatives market participants - exchanges, financial institutions, asset managers, and commercial end-users, among others - on legal and regulatory matters under the Commodity Exchange Act, the Dodd-Frank Act, and related CFTC and NFA rules and regulations. Likewise, she counsels DAOs, crypto exchanges, tradfi investors, and other digital asset market participants on jurisdictional issues and best practices in an evolving regulatory landscape. Ms. Isaac has significant experience negotiating bespoke derivatives transactions in a variety of asset classes (interest rates, FX, digital assets, and commodities), including ISDA Master Agreements and related documentation. She regularly advises clients on effectively transitioning away from LIBOR.
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Nihal Patel
Partner
Fried Frank Harris Shriver & Jacobson
Mr. Patel represents both financial institutions and buy-side market participants on regulatory and compliance issues... | Read More
Mr. Patel represents both financial institutions and buy-side market participants on regulatory and compliance issues relating to securities and derivatives trading. Clients seek his advice on broker-dealer regulation and swap regulatory issues arising under Title VII of the Dodd-Frank Act. Mr. Patel has represented industry and trade groups including ISDA (documentation for addressing CFTC regulations adopted under Dodd-Frank), SIFMA (margin for TBAs and derivatives capital rules), and ARRC (benchmark transition). In addition to his regulatory practice, Mr. Patel maintains an active transactional practice, regularly advising clients on structuring complex financial transactions. Clients benefit from his experience involving transactions in highly regulated environments, as well as his extensive experience in drafting and negotiating prime brokerage, derivatives, and other trading and financing documentation.
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