While the COVID-19 pandemic has taken center stage the past few months, the transition away from LIBOR has been continuing in the background, almost unnoticed at times. Some market participants have questioned whether the disruption caused by COVID-19 will delay the LIBOR transition process. The proposed timelines have stretched a bit, but regulatory authorities have been adamant that the December 31, 2021 deadline remains firm.
Earlier this month, the Alternative Reference Rates Committee of the New York Federal Reserve (ARRC) began a full court press to make the case for transitioning to SOFR and guide market participants to that goal. Tom Wipf, the chair of the ARRC, spoke at webinars hosted by the Loan Syndications & Trading Association (LSTA) and the International Swaps and Derivatives Association (ISDA). The ARRC also kicked off a SOFR Summer Series of webinars open to the public. The speakers include many top officials and industry leaders, and their insight is invaluable. There are also lively questions and answers from the moderator and the internet audience.
The tone of the webinars so far has been one of gentle persuasion rather than forced conversion. They make a good point for transitioning by the middle of next year, well before LIBOR actually ceases to be published. Why originate LIBOR loans where the interest rate will switch less than six months later, possibly before the first interest rate reset date? Why leave things to chance and heated negotiations at the last minute when it can be done in a consensual, organized manner? For swaps, anyone issuing a LIBOR swap now extending more than eighteen months in the future is really writing a SOFR swap, so why not just switch? It’s not quite that simple, but planning and taking steps now can make it easier.
For those who miss the live webinars, not to worry– many people missed the webinars live since they were quickly oversubscribed. Fortunately, all of the webinars and presentation slides are available on YouTube for viewing any time. This past Wednesday July 22, the discussion turned to transition of LIBOR Derivatives. Up next week is Accounting, Tax and Regulation on Wednesday July 29, followed by Approaching the Transition on Monday August 3, and a Live Office Hours session on Friday August 7.