The Alternative Reference Rates Committee today issued consultations on draft fallback language for floating rate notes and syndicated business loans that reference the U.S. dollar London Interbank Offer Rate. With Libor’s future beyond 2021 uncertain, the ARRC — a group of market participants convened by the Federal Reserve — is developing plans to facilitate the transition to its recommended alternative rate, the Secured Overnight Financing Rate.
The consultations released today are tailored to specific products but aim to promote consistency by defining a “trigger event” that would start a transition from Libor, a successor rate “waterfall” that would identify the priority of unadjusted Libor replacement rates and a spread adjustment waterfall that would specify the priority of spread adjustments to be applied due to differences between Libor and SOFR. Feedback on the consultations is due by Nov. 8. For more information, contact ABA’s Hu Benton.