LIBOR Transition: Term SOFR Formally Recommended… All Done?

On July 22, 2021, the Alternative Reference Rates Committee of the Federal Reserve Bank of New York (ARRC) followed up on its guidance from June and its confirmation on July 19 by formally recommending CME Group's forward-looking SOFR term rates. After a roller coaster ride earlier this year, the messaging of the ARRC on Term SOFR settled down. Other than the mystery as to exactly when the announcement would be made, the statement was practically a nonevent. Proactive lenders that have been waiting patiently were quietly preparing their Term SOFR loan forms over the past few weeks. A flurry of new Term SOFR loans should not be far behind.

With this development, it might seem that the market has all the tools that it needs to transition to SOFR. Between daily simple SOFR, compounded SOFR, published SOFR averages and now Term SOFR, there should be a variant of SOFR that works for almost every loan. As the ARRC proclaimed in its statement, the recommendation of