Hot Topic – The Expiry Of LIBOR

By Angela L. Drumm

September 6, 2017

• Give me the Summary:

LIBOR – the London interbank offered rate – is set to expire (or transition to an alternative benchmark) in 2021. The LIBOR panel banks and regulators feel that LIBOR is merely an average of expert guesses, and they want to find a replacement index that is based on actual borrowing costs.

• What does this mean for me?

LIBOR is used for trillions of dollars of contracts, including a sizable percentage of loans documented in and around St. Louis, Missouri. Current loan documents should be reviewed and amended, as needed, to confirm that the lender can select a “comparable” or “alternative” replacement index in the event LIBOR is no longer available or becomes illegal. Further, lenders should closely evaluate the risk of continuing to base new loans on LIBOR (even if the loans will mature prior to 2021) and determine if they should instead use a non-LIBOR index. When alterative indexes are used, the appropriate adjustments should be made to the applicable margins to ensure substantially similar loan pricing.

• I need more info.

For more information about these topics or assistance with other commercial financing issues, please contact me or any other member of the Banking & Finance team at Carmody MacDonald P.C.

Angie Drumm is a Principal at Carmody MacDonald P.C. and concentrates her practice in Banking & Finance. As a member of the firm’s Business Law Group, she represents lenders and venture capital investors in finance transactions that range from $5 million to more than $100 million, often utilizing tax credit incentives. She also helps clients navigate through all aspects of commercial real estate matters – from the acquisition to development and leasing.

©2017 Carmody MacDonald P.C. This post is provided for informational purposes only. It is not intended as legal advice nor does it create an attorney/client relationship between Carmody MacDonald and any readers or recipients. Readers should consult counsel of their own choosing to discuss how these matters relate to their individual circumstances. Furthermore, prior results do not guarantee a similar outcome. The choice of a lawyer is an important decision and should not be based solely upon advertisements.