The Alternative Reference Rates Committee ("ARRC") summarized its recommendations to date for spread-adjusted fallbacks for contracts that reference the U.S. dollar London Interbank Offered Rate ("LIBOR"). The ARRC stated that the summary was intended to contain the key details of the recommendations the ARRC has made or intends to make in relation to fallback language, and for state legislation (New York and Alabama) that references ARRC-recommended fallbacks.
In its summary, the ARRC detailed its recommendations for:
- trigger events related to LIBOR's official end date and "re-cessation triggers," in the event that a regulator declares LIBOR no longer to be a representative reference rate;
- a "waterfall" of replacement rates based on the Secured Overnight Financing Rate (or "SOFR");
- spread adjustments that would accommodate the difference between LIBOR and the fallback rate; and
- simple fallback language for consumer products that reference LIBOR.
Commentary Nihal Patel
While not designed to contain anything new, the publication is a useful reference guide and includes links to relevant consultations and related materials.
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