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ARRC Releases Updated Recommended Hardwired Fallback Language for Syndicated Loans
Practical Law Legal Update w-026-4266 (Approx. 3 pages)
ARRC Releases Updated Recommended Hardwired Fallback Language for Syndicated Loans
by Practical Law Finance
| Published on 08 Jul 2020 • USA (National/Federal) |
The Alternative Reference Rates Committee (ARRC) released its updated USD LIBOR hardwired fallback contract language for syndicated business loans. The language is intended to ensure that loan agreements remain effective if LIBOR is discontinued, as is anticipated to occur at some point after 2021.
The hardwired fallback language was updated to:
- Recommend the use of simple daily SOFR (Secured Overnight Financing Rate) in arrears in the second step of the waterfall.
- Include a more permissive early opt-in trigger.
The ARRC originally released recommended fallback language for syndicated business loans in April 2019 (see Legal Update, ARRC Recommends Fallback Benchmark-Replacement Language for Syndicated Loans and Floating Rate Notes). The fallback language is intended to ensure that loan agreements remain effective if LIBOR is discontinued, as is anticipated to occur at some point after 2021. These updates from the ARRC support their best practice recommendation that syndicated loans begin using hardwired fallback language no later than September 30, 2020.