Practical Law Glossary Item 4-382-3446 (Approx. 2 pages)
Glossary
Eurodollar Rate
Also known as USD LIBOR. This rate is equal to the Eurodollar base rate, adjusted for the maximum reserve requirements lenders are required to maintain on their Eurodollar deposits. This is a standard formula that was included in most Eurodollar Rate loan agreements and was typically drafted as follows: Eurodollar Base Rate divided by (1.00-Eurocurrency Reserve Requirements). This rate is higher than the Eurodollar base rate. Following the 2008 financial crisis, this rate was used to compensate for the fall in the base rate and to take advantage of any increases in the Eurocurrency reserve requirement.
The Eurodollar Rate/USD LIBOR has been phased out as a reference rate. Term SOFR is the preferred replacement rate for USD LIBOR among US syndicated loan market participants.