Amol Dhargalkar speaks to the Wall Street Journal about SOFR's rise in 2022
Summary
The Wall Street Journal spoke to Amol Dhargalkar about U.S. companies and financial institutions settling on a new interest-rate benchmark to replace LIBOR. Sales of corporate loans and derivatives tied to SOFR have soared in 2022, accelerating the shift away from issuing new debt tied to LIBOR.
The Wall Street Journal“There seems to be a clear No. 1 candidate for most deals,” said Amol Dhargalkar, managing partner and global head of corporates at Chatham Financial, a financial-risk adviser.
Companies, banks and traders said they picked SOFR — which is based on the cost of transactions in the market for overnight Treasury repurchase agreements — in part because its stability during the COVID-19 pandemic’s market swings demonstrated it is robust enough to support large numbers of financial arrangements.
“There seems to be a clear No. 1 candidate for most deals,” said Amol Dhargalkar, managing partner and global head of corporates at Chatham Financial, a financial-risk adviser.
SOFR has gained traction since a Dec. 31 deadline that prohibited U.S. banks from issuing new debt tied to Libor. U.S. companies in January sold 61 leveraged loans tied to SOFR totaling over $66 billion, according to Leveraged Commentary & Data, a unit of S&P Global Inc. That is up from around $3.9 billion raised across four deals in December.
The weekly count of derivatives trades tied to SOFR surpassed that of Libor for the first time in the week ended Jan. 21, when the former totaled 8,200 compared with the latter’s 6,815, according to a Chatham Financial review of market data.
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