As lenders start to prepare for the transition from LIBOR, practical concerns as to how to implement the change are coming to the forefront. Many sources have highlighted the need for lenders to review the loan agreements in their portfolios, but not many have given much insight on the actual scope of review that is needed.
Best practices dictate that every loan agreement should be reviewed to see exactly what LIBOR terms are used, exactly where they are used and exactly what the LIBOR provisions say. Even if a lender’s loan agreements generally follow a template, there are bound to be a few that vary. Unless there is already a reliable list of these variances, all the loan agreements (in a perfect world) need to be reviewed to find these few that vary. In larger, more negotiated loan portfolios, these loans that vary may be more than just a few.