LIBOR, the “world’s most important number,” is being phased out. Created almost 50 years ago on August 15, 1969 - the opening day of the Woodstock music festival - LIBOR began as a floating, market determined interest rate for syndicated loans, but over time has become the benchmark interest rate for an estimated $350 trillion of outstanding financial arrangements around the world. These contracts include public and private loans and bonds, consumer financial products such as credit cards, mortgages, and student loans, and some $200 trillion in interest rate derivatives. Due in large part to concern that the determination of LIBOR is based on fewer and fewer interbank transactions and therefore is an increasingly unreliable benchmark for the global financial markets. Regulators worldwide have been working to develop alternative benchmarks. Over the past few years, the US Federal Reserve, the UK’s Financial Conduct Authority, and other regulators have convened industry-led working groups to develop risk-free rates as an alternative to LIBOR, with the goal of replacing LIBOR by the end of 2021.
This course, presented by Greg Harrington, Partner, and Arturo Caraballo, Counsel, in Arnold & Porter’s Latin American corporate finance practice, provides an overview of the status of the Alternative Reference Rates Committee (the “ARRC”), a private industry group convened by the Federal Reserve Board and the New York Federal Reserve Bank to address the market’s transition away from US dollar LIBOR. The course will address issues surrounding the Secured Overnight Financing Rate (“SOFR”), the alternative reference rate that has been selected by the ARRC to replace LIBOR, and related spread adjustments. The course will also review contractual language proposed by the ARRC to address the transition away from LIBOR, including the “amendment” and “hardwired” approaches, cessation and pre-cessation triggers, early opt-in provisions, and lender voting provisions. The course will touch upon issues surrounding the transition away from LIBOR as it is being implemented by the International Swaps and Derivatives Association (“ISDA”), including potential areas of divergence between the approaches adopted by the loan markets and the derivatives markets and their impact on interest rate hedging transactions. The course will describe regulatory, tax, and litigation risks associated with the transition away from LIBOR and provide recommendations of next steps for counterparties with significant LIBOR exposures.
Arturo Caraballo has extensive experience representing clients in a broad range of international financial transactions, with an emphasis on Latin America.
Mr. Caraballo has advised foreign and domestic, sovereign and private sector clients on hundreds of complex transactions throughout Latin America. The transactions on which he has advised clients include capital markets offerings and liability management operations; bilateral and syndicated loans; debt restructurings; project and structured financings; export and multilateral credits; investment management agreements; and swap and derivative transactions.
Mr. Caraballo first joined the firm in 1997 and spent nearly a decade in the firm's Corporate and Securities practice. Before returning in 2015, he served as President and General Counsel of Veris Consulting, Inc. where he managed a wide range of contractual, corporate, litigation and risk management matters for the accounting and financial management consulting firm and oversaw the firm's day-to-day operations.
Mr. Caraballo graduated from Tulane Law School and has served on the Board of Directors of the Hispanic Bar Association of the District of Columbia. He is fluent in Spanish.
Gregory Harrington has extensive experience in major international financial transactions in Latin America, particularly in the area of capital markets and banking. Mr. Harrington's practice includes corporate and project finance, including equity and debt securities sold pursuant to US Securities and Exchange Commission (SEC) registration, Rule 144A or Regulation S; and listings on the New York, London, Luxembourg, and Irish Stock Exchanges; Securities Act, Securities Exchange Act, and Investment Company Act compliance; and advising sponsors and lenders in connection with project finance transactions.
Prior to joining the firm, Mr. Harrington was a partner at another international law firm based in São Paulo, having previously practiced in Madrid, New York, and Washington, DC. Prior to attending law school, he was a lending officer at Chemical Bank (now JPMorgan Chase Bank) in New York, including participating on the creditors committee for the renegotiation of the Republic of Colombia's international debt obligations.
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