Preparing for the phase out of LIBOR – action required

At one level the scale of the task is daunting. LIBOR is often referred to as “the world’s most important number” for the simple reason that assets with a value equivalent to hundreds of trillions of pounds are benchmarked against it and the process for its phase out is well underway.  However, in many cases the steps required to be taken to understand the issues arising for individual businesses and lenders are relatively straightforward and we are helping to guide our clients through the options currently available to them across markets. 

We have recorded a presentation setting out the background to LIBOR phase out, the timeline and advice on practical steps as well as the issues for parties to contracts referencing LIBOR with a post 2021 maturity date.  Viewers should be aware that this is a fast moving area and since this presentation was prepared an announcement from the ICE Benchmark Administration (IBA) regarding consultation on the proposed date by which it will cease publication of USD LIBOR suggests that final publications of a selection of certain USD LIBOR rates may continue to the end of June 2023.  NB: The same does not apply to GBP LIBOR, EUR LIBOR, CHF LIBOR or JPY LIBOR (all tenors) in respect of which the IBA is consulting on ceasing publication at the end of 2021, per their announcement to this effect of 18 November 2020. 

We have also recorded a presentation looking in more detail at one of the choices to be made when drafting agreements using risk-free reference rates compounded in arrears, that is whether to use “lookback with observation shift” or “lookback without observation shift” and the possible consequences of either option.

There is lots of information available on the internet in relation to the LIBOR transition and we have set out some useful links below. 

Useful links: 

Bank of England – Transition to sterling risk-free rates from LIBOR

FCA – Transition from LIBOR

ICE Benchmark Administration