January and February are months for action. We are all (at least
for a little while) eating healthier and going to the gym.
Companies can take action, too, and proactively address issues
related to their loan documents.
Address LIBOR's Imminent Demise
Most commercial loans have interest rates that reference the
London Interbank Offered Rate (LIBOR). LIBOR is intended to measure
the rate at which large global banks will lend to each other in the
London financial markets. However, LIBOR is scheduled to be
discontinued in 2021. Borrowers should review their loan documents
to see how—if at all—the disappearance of LIBOR is
addressed: Does the referenced index switch to the prime rate,
which is historically higher than LIBOR? Does the lender have the
option to unilaterally impose a new index? Neither option would be
palatable to many borrowers.
