ARRC survey: Good progress on Libor business loan transition, continued action needed

The Alternative Reference Rates Committee today released “encouraging” results from its Loan Remediation Survey, which sought feedback on plans and steps being taken by lenders and borrowers to remediate U.S. dollar Libor business loans prior to June 30, 2023.

More than 70 survey submissions were received, and most respondents indicated they have documented remediation plans in place and highlighted plans to actively transition their Libor loans to Secured Overnight Financing Rate. While the majority of business loan borrowers indicated they have been contacted by their lenders about transitioning some or all of their Libor loans, the majority of syndicated lenders said they had not been contacted by an agent or had received no or at most only a few amendments. Only 30% of syndicated lenders reported receiving a significant number of amendments from an agent. More than half of lender respondents expected that the majority of their Libor loans would only have transitioned away by the end of the second quarter of 2023 or later.

“Results from the survey reflect encouraging awareness of the need to be ready for the LIBOR transition, but with just nine months left until Libor ends, it also highlights the need to ensure that plans for active loan conversion quickly become a reality,” said Tom Wipf, ARRC chair and vice chair at Morgan Stanley. “We have seen the pace of loan refinancing slow in recent months, which reemphasizes the need for lenders to actively reach out to their borrowers to transition now, and not to wait until the next refinancing or the last moment and risk having more loans referencing Libor as of June 30, 2023, than expected.”