On June 8, 2023, the Loan Syndications and Trading Association (LSTA) published a release called "LIBOR Cessation: Things You Must Know" relating to the impending cessation of panel USD LIBOR on June 30, 2023 (Release). The LSTA recapped the state of transition in the Release and warned market participants that some variations of amendment fallback language in credit agreements do not permit the use of synthetic USD LIBOR.

In the Release, the LSTA reported that the loan market continues to make material progress towards transition. As of the end of May, nearly 40% of loans in the JPM Index were visibly on SOFR and the pace of transition is increasing, with more than $100 billion in fallback amendments in May 2023.

In addition, the Release noted that according to a May 2023 survey of the remaining loans in the CS Index:

The LSTA noted in the Release that about 11% of LIBOR loans in the CS Index have ARRC amendment approach language. According to the Release, in cases where ARRC amendment approach language has been incorporated exactly into a credit agreement, the use of synthetic USD LIBOR is "foreclosed." The UK Financial Conduct Authority announcement that USD LIBOR is no longer representative will commence a "Benchmark Unavailability Period," as provided by this ARRC language, meaning that the alternate base rate (ABR) will be the "Benchmark." Therefore, unless these loans are remediated, ABR will be used instead of LIBOR at the next interest reset after June 30, 2023.

For more information on fallback language, including the ARRC amendment approach, see Loan Agreement LIBOR Fallback Language Toolkit. For more information on synthetic USD LIBOR, see Practice Note, Finance Fundamentals: LIBOR v. SOFR: Synthetic LIBOR.