In our January 22, 2021 article, we discussed that on November 30, 2020, ICE Benchmark Administration (IBA) announced that it would “consult” with its regulator (the Financial Conduct Authority (FCA)) on its intention to cease publication of the various existing LIBOR tenors (in U.S. Dollars and other currencies).
On March 5, 2021, IBA confirmed, the timetable for the cessation of LIBOR tenors, as summarized below:
|USD 1-week and 2-month
|USD overnight & 1,3, 6 and 12 months
|All tenors- euro, yen, Swiss francs and sterling
The delayed cessation of the 1, 3, 6 and 12 month USD LIBOR tenors until June 30, 2023 will permit that 1, 3, 6 and 12 month USD LIBOR tenors in legacy transactions to expire on the last day of such tenors. Since 1-week and 2-month USD LIBOR tenors are rarely used in floating-rate commercial loan facilities, we don’t expect much pushback in the market when those USD LIBOR tenors are no longer available.
The LIBOR cessation dates (and possibly, this announcement by IBA itself) will be “trigger events” for the LIBOR fallback provisions in credit agreements and swap documents. Since March 5, agents in syndicated loan transactions have begun to issue alerts to the borrowers and lenders in their facilities that summarize the trigger events. All lenders should determine if and when any notice is required to be sent to borrowers under its LIBOR fallback language as a result of this announcement.