Trust banks and other financial institutions that administer large portfolios of debt securities have relied on LIBOR to set interest rates. In most, if not all, debt issued prior to 2017, LIBOR‘s expected phaseout was not contemplated, and these contracts do not include a mechanism to substitute an alternative.  

Perkins Coie’s LIBOR attorneys are working with clients in the preparedness phase of the inventorying and indexing of the relevant terms in these contracts, which often number in the multiple of thousands. These efforts will provide a basis for our legal advice across this wide spectrum, and more importantly, in the strategic planning that will be necessary in advance of LIBOR’s phaseout.

Assisting our clients, including banks, investment managers and corporate end users, we are developing analyses of LIBOR provisions in over-the-counter derivatives and other financial transactions.

Industrywide "documentation patches" are being developed by the International Swaps and Derivatives Association (ISDA) to address LIBOR successor provisions in these transactions, since fallback provisions in the existing documentation did not contemplate the cessation of the reference rate. Many companies are expected to adhere to industrywide LIBOR replacement protocols developed by ISDA or incorporate those protocols into their transactional agreements through bi-lateral amendments. In addition, our attorneys are advising  investment managers and other fiduciaries to address client-specific considerations that relate to LIBOR provisions in such transactions.

Asset managers purchase various types of investments that are tied to LIBOR, including derivative contracts, loans and other fixed income investments. Accordingly, our attorneys assist asset managers in their analysis of LIBOR provisions in such investments, as well as in documenting fallback language and moves to alternative rates. Through our longstanding work in the repurchase agreement market, our team is well positioned to counsel asset managers with respect to the Secured Overnight Financing Rate (SOFR) and derivative products that reference SOFR.

Banks have long relied on LIBOR as the benchmark rate used to set interest rates in loan documents for all types of commercial loans, such as working capital facilities, commercial real estate loans, asset-based loans and acquisition financings.

In our representation of financial institutions, we assist national banks with market caps over $250 billion, local banks, syndication agents and loan participants. As our lender clients prepare for the transition, we are reviewing existing loans tied to the benchmark for necessary language, or fallback provisions, as well as the mechanics for choosing a replacement rate when LIBOR ceases to be published. On behalf of lender clients, we ensure that the fallback provisions are broad enough to cover all of the possibilities related to the LIBOR phaseout, and ascertain that they remain abreast of, and fully understand, ongoing developments regarding the LIBOR transition.

Our corporate clients require predictability and certainty in evaluating the company's future cost of borrowing, interest expense and ability to refinance existing debt. These commercial borrowers engage in a wide range of complex commercial lending transactions that include multimillion-dollar single-bank loans and billion-dollar syndicated credit facilities.  On behalf of these clients, we negotiate fair processes for how parties determine the replacement index, and ensure the processes are articulated with a high level of specificity. We also advise on the effects of the replacement index on the "all in" rate and negotiate flexibility for our borrower clients to seek alternative exit strategies.