Although the end of the London Interbank Offered Rate (LIBOR) has been extended from year-end 2021 to June 2023 for certain tenors in U.S. financing arrangements, lenders are strongly discouraged from funding new LIBOR loans starting in 2022. In an article for StrategicCFO360, Bass, Berry & Sims attorneys Leslie Ford, Eric Knox, Katie Smalley and Taylor Wirth discussed the context behind the cessation of LIBOR, implications for finance and commercial transactions, and considerations for corporations and securities.
LIBOR has been the preeminent benchmark for determining interest rate pricing for instruments such as credit facilities, interest rate swaps, and mortgages, and the cessation of its publication is anticipated to have far-reaching implications. The authors suggest that companies should collaborate with internal teams and external partners to stay ahead of the upcoming transition in order to minimize economic risk. Specifically, companies should consider the following:
- Seek information and education regarding current recommendations for benchmark replacement.
- Plan proactively with lenders regarding protocol for LIBOR replacement in existing and new credit facilities.
- Continue to address material risks related to the LIBOR transition in SEC filings and other communications with investors.
The full article, “How to Prepare for the End of LIBOR” was published on June 9 by StrategicCFO360 and is available online.