The End of LIBOR: A Practical Discussion for Attorneys

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.

Learning Objectives:

1. Review the current state of regulatory and market activity concerning transition away from LIBOR, with emphasis on activity in the US
2. Discuss contractual provisions being adopted by the market to address transition away from LIBOR
3. Identify practical issues associated with the transition away from LIBOR
4. Assist clients with the legal and regulatory risks associated with the transition away from LIBOR