- What is LIBOR Transition?
- Why are the markets moving away from LIBOR as the benchmark rate?
- When are market participants expected to start using RFRs?
- How will LIBOR Transition be achieved?
- What should you be doing now?
With the expectation that the publication of the London Interbank Offered Rate (LIBOR) will cease by the end of 2021, financial market participants need to be planning the transition of all LIBOR-based exposures to risk-free interest rates in the next six to twelve months. Working groups for the key currencies have identified the proposed benchmark rate for each of those currencies and are developing recommended conventions for the application of those benchmark rates. In addition, proposed legal drafting for the incorporation of those conventions into existing and new transactions is available. We recently advised the lender on one of the first project financings to be done using SONIA from financial close and we are currently advising on a number of other financings using risk free interest rates. In this briefing, we bring together our experience on these transactions to explore some of the challenges arising in the context of financing structures using interest rate hedging in relation to specific loan interest exposures (as opposed to more generic corporate hedging arrangements), such as project and asset backed finance (as seen in the aviation, real estate and shipping industries).