Preparing for the
LIBOR Transition:
A Treasury Checklist
LIBOR LIBRARY
Treasurers, Your LIBOR Feedback is Needed
for Fallbacks
Why is the Most Important Number in the World Going Away?
Libor
Sink Or Swim: Libor’s Transition To A New Reference Rate Leaves Investors Less Than Buoyant
Which Products
Will the LIBOR Transition Impact?
Libor Fallback Language:
What Treasurers
Need to Know
The transistion is coming.
Make sure you're ready.
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Why the Libor Transition is a Marathon Not a Sprint
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Preparing for the
LIBOR Transition:
A Treasury Checklist
LIBOR vs SOFR: Big Changes Are Coming for US Treasurers
2021
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Given Libor’s ubiquity in the plumbing of financial systems, its departure will have
. Here’s how you can get started on mobilization.
Transitioning away from the London Interbank Offered Rate (Libor) is , especially considering that many banks and corporates do not appear to be on the same page as regulators.
“We get really nervous when we see people talking about specificity in fallback language in light of the uncertainties that exist.”
“There will be a risk that Libor might not even be available post-2021. And that really forced the industry to start thinking about how and when they should transition away from Libor.”
The London Interbank Offered Rate — aka LIBOR — is the most widely-used benchmark for short-term interest rates in the world.
And what's replacing it? Ming Min Lee, a principal with Oliver Wyman, has the answers.
So if LIBOR is so popular, then why is it going away?
"If a corporate is just getting involved in Libor... you've got to do a survey of the type of debt documents and derivative instruments that you have in place where Libor might be in play. So the first thing you've got to do is get a handle on what type of facilities you have that may be potentially impacted by the discontinuation of Libor."
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"The first thing you've got to do is get a handle on what type of facilities you have that may be potentially impacted by the discontinuation of Libor."
Kimberly MacLeod, Partner with Hunton Andrews Kurth, discusses what corporate treasury professionals can do to away from Libor.
an extraordinary impact on treasury processes, technology, and operations
If LIBOR is so popular, then why is it going away?
Ming Min Lee, a principal with Oliver Wyman, has the answers.
And what's replacing it?
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The Association for Financial Professionals (AFP) is the professional society committed to advancing the success of finance executives globally. AFP established and administers the Certified Treasury Professional and Certified Corporate FP&A Professional credentials, which set standards of excellence in finance. Each year, AFP hosts the largest networking conference worldwide for over 6,500 corporate finance professionals.
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AFP has joined the Alternative Reference Rates Committee (ARRC) and will provide updates from committee meetings.
Libor Transition: 3 Ways Treasurers Can Address the Challenge
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Libor Transition:
Key Steps to Prepare
Libor Transition: 3 Ways Treasurers Can Address the Challenge
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Libor Transition: Replacements Begin Addressing Cash Products
Understand where LIBOR exists within your organization. Take note of all your borrowing and funding commitments that are dependent upon LIBOR. Consider payroll loans, supply chain financing, factoring, asset based lending, in-house banking, etc. Figure out what your spreads and maturities are, and what you’re going to need to refinance your contracts, and what the results of triggering existing fallback language will be.
take
inventory
Educate yourself about SOFR, and how it is performing relative to LIBOR. Determine what that means for your organization’s credit spreads, because
credit spreads are based on risk, and each corporate carries its own, unique risk. Compare yourself not only to businesses in the same industry, but also comparable benchmarks and credit spreads.
do your
homework
consider
the impact
How will transitioning to SOFR affect you? Consider the procedures you’ll need to put in place to track SOFR on a daily basis. Contemplate whether or not you need to perform a periodic analysis to optimize your capital structure and, if so, the timespan between analyses.
get fallback language
Get feedback from your fellow AFP members and your bankers, and perhaps even reach out to the Alternative Reference Rate Committee (ARRC) directly to help you anticipate upcoming challenges. There may even be opportunities to work with the ARRC and help make this a more seamless transition.
If you’re doing a refinancing or are entering into an amendment for an existing credit facility, discuss SOFR with your bank partners and see if you can get fallback language implemented into the agreement if your loans extend beyond 2021. Banks may be willing to address the issue and include language that states if LIBOR goes away, the borrower and the administrative agent will agree on a replacement index.
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involved
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libor
sofr
Key differences between
LIBOR and SOFR
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LIBOR vs SOFR
$36
trillion
in notional outstanding in the U.S. will not mature before LIBOR is set to end.
LIBOR'S FLAWS
$500
million
in daily three-month LIBOR trades
$200
trillion
in USD LIBOR-based contracts outstanding
LIBOR has been an endangered species for some time. In 2012 it was revealed that financial institutions were manipulating the rate for their own gain.
This led to fines, jail terms, and reputational damage to the financial sector.
A Deep Dive
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THE BASICS
LIBOR
IBOR
SOFR
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