ARRC Releases Recommended LIBOR Fallback Language For Bilateral Business Loans And Securitizations

Interest rate calculations on trillions of dollars of loans and other financial products are pegged to the U.S. dollar London Interbank Offered Rate (LIBOR), a reference rate that will likely not exist or be robust after 2021. It is anticipated that the transition away from LIBOR to a new reference rate has the potential to be disruptive to the financial markets and market participants. In order to avoid disruptions in financial activity and financial transactions, Day Pitney is advising clients entering into LIBOR-based contracts to consider including "fallback language" in the documentation. Fallback language is designed to provide an orderly and transparent transition from LIBOR to a new replacement reference rate.