In the Wall Street Journal, Amol Dhargalkar explains how looming LIBOR deadline will affect U.S. corporate treasury teams
Summary
U.S. companies will no longer be able to borrow against LIBOR starting on January 1, 2022. In the Wall Street Journal, Amol Dhargalkar explains what this means for corporate treasury teams.
The Wall Street JournalMost companies will have to update their systems to handle compounded-interest calculations given that those weren’t needed on a frequent basis prior to SOFR, said Amol Dhargalkar, managing partner and global head of corporates at Chatham Financial Corp., a financial-risk adviser.
After the end of 2021, banks will not longer be able to issue new loans or financial contracts pinned to LIBOR. As U.S. companies plan to transition their legacy contracts to alternative reference rates and begin to borrow with new benchmark rates, their systems will have to handle new calculations. Most companies will have to update their systems to handle compounded-interest calculations given that those weren’t needed on a frequent basis prior to SOFR, said Amol Dhargalkar, managing partner and global head of corporates at Chatham Financial Corp., a financial-risk adviser. These upgrades often require additional time and money for corporate treasury teams, he said.
Our expertise for corporates
Chatham provides the knowledge and expertise needed to manage the financial risk associated with interest rate, commodity, and foreign exchange volatility. We develop and implement hedging strategies for hundreds of public companies annually, based on deep and productive banking relationships, giving us market data and insights to enable you to secure the best pricing and terms. Our goal is to empower you to strengthen your financial position and support your company’s financial objectives.
With expertise across hedge accounting, regulatory compliance, valuations, and hedging transactions, we can support all aspects of financial risk management. Our ChathamDirect platform provides convenient workflow, robust analytics, and comprehensive accounting methodologies, supported by our unmatched commitment to client service. This unique combination of strategy, operations, and technology will empower you to run a best-in-class hedging program.