FAQ: USD LIBOR transition to SOFR
- September 11, 2020
Real Estate | Kennett Square, PA
Private Equity | Kennett Square, PA
Real Estate | Kennett Square, PA
Hedging and Capital Markets
Real Estate | Kennett Square, PA
USD LIBOR will transition to SOFR, likely by the end of 2021. Chatham's experts answer the most pressing questions asked by our clients about how the transition will affect them.
In July 2017, the UK Financial Conduct Authority (FCA) announced that it would no longer require banks to submit cost of funds quotes in support of calculating LIBOR, calling into question LIBOR’s viability and availability past 2021. LIBOR underlies hundreds of trillions of dollars in financial instruments, including loans and derivatives, and three years later, the idea of transitioning to a new rate continues to raise many questions among our clients and industry partners.
Chatham has been active in the LIBOR transition, representing end users before the key players identified below, to ensure as smooth a transition as possible from their perspective. These are some of the LIBOR transition-related questions we receive most often. You can find more information in our LIBOR transition resource stream.
Basics of transition
- Who are the key players in LIBOR transition?
- When is LIBOR going away, and what are some of the key milestones between now and then? Will it be delayed because of COVID-19?
- When do commercial real estate lenders, including Freddie Mac and Fannie Mae, plan to stop lending based on LIBOR?
- What is SOFR, and how is it different from LIBOR?
- How does Fed involvement in the Treasury repo markets affect SOFR?
- What are some of the key challenges facing SOFR adoption (i.e., lack of term structure, alternative rates)?
- Can I buy a SOFR cap today?
Transition of existing loans and derivatives
- What are the main issues that must be addressed in transitioning a loan or derivative from LIBOR to SOFR?
- How are fallback triggers, rates, and spread adjustments addressed in loan and derivative documents?
- What happens to my existing LIBOR cap or swap once LIBOR goes away?
- How do I document my loan and derivative so they convert from LIBOR to SOFR at the same time? What risks do I take today when closing or hedging a LIBOR loan?
- How has accounting guidance evolved to accommodate LIBOR transition?
- How will designated hedges be impacted?
- How will debt and loans be impacted?
- How will other contracts with embedded derivatives be impacted?
- How has the SEC addressed disclosure requirements?
Basics of transition
Questions around the viability of LIBOR first arose from the LIBOR manipulation scandals that came to light beginning in 2007, though allegations of manipulation date back to the 1990s. In light of this manipulation, global regulators and policymakers engaged in a concerted effort to identify more robust alternatives. Some of the key players in the transition include:
Alternative Reference Rates Committee (ARRC): the ARRC is a private-public partnership convened in 2014 by the Federal Reserve Board of Governors (the Fed) and the Federal Reserve Bank of New York (New York Fed) to ensure a successful transition from USD LIBOR to a more robust reference rate. Chatham has responded to ARRC’s public LIBOR transition consultations and participates in ARRC working groups.
Commodity Futures Trading Commission (CFTC): the CFTC regulates U.S. futures and over-the-counter (OTC) derivatives markets, which consists of over $300 trillion in LIBOR-linked transactions. Chatham is a member of the CFTC’s Market Risk Advisory Committee and its Interest Rate Benchmark Reform Subcommittee.
Financial Accounting Standards Board (FASB): the FASB is an independent, private-sector non-profit that establishes financial accounting and reporting standards for GAAP filers. Chatham has consulted with the FASB regarding the LIBOR transition and the related accounting standard, ASC 848.
Financial Conduct Authority (FCA): the UK FCA regulates the Intercontinental Exchange (ICE), the LIBOR administrator.
International Organization of Securities Commissions (IOSCO): IOSCO regulates and sets standards for the global securities sector. In 2013, IOSCO released its Final Report on Principles for Financial Benchmarks, establishing guidance that the ARRC and other global standard setters have utilized in selecting replacement rates as the market transitions from LIBOR and similar rates.
International Swaps and Derivatives Association (ISDA): ISDA exists to foster safe and efficient derivatives markets and is focused on a smooth LIBOR transition in derivatives, including by drafting forms of documents informed by public feedback. Chatham is an ISDA member and has responded to ISDA’s public LIBOR transition consultations, additionally participating in LIBOR transition working groups.
The nature of these players’ involvement in the transition has evolved over time. For example, in March 2020, the ARRC proposed a New York state legislative proposal to amend financial contracts that lack adequate fallback language, both to address existing agreements where transition may be challenging (e.g., bonds that require 100% of bondholders to consent to transaction), as well as to minimize adverse economic outcomes in transition.
Similarly, in June 2020, the UK Parliament announced its intentions to legislate to amend and strengthen the existing regulatory framework surrounding critical benchmarks such as LIBOR. The legislation will imbue the FCA with the regulatory powers to enforce the LIBOR transition. (Back to top)
There is no concrete date set for the LIBOR transition. In July 2017, the FCA announced that LIBOR is at risk of discontinuation after the end of 2021. Between now and then, some of the key milestones include:
- Updated ISDA documentation: in Q3 2020, ISDA plans to release revised definitions to better accommodate permanent cessation of LIBOR, along with a documentation protocol designed to facilitate an efficient transition of existing derivatives; and on a go forward basis, derivatives executed after publication of the updated ISDA definitions will automatically incorporate ISDA’s fallbacks.
- Clearinghouse “big bang:” in mid-October 2020, LCH and CME, the largest central clearinghouses, will begin using SOFR, rather than Fed Funds, for purposes of valuing positions and collateral held against them.
The current COVID-19 situation has not changed the timeline for the LIBOR transition. As recently as June 2020, the head of market policy with the FCA, Edwin Schooling Latter, even suggested that the announcement of the eventual cessation of LIBOR could come as early as year-end 2020. With that, certain interim deadlines have been extended, as described in our LIBOR transition market brief, which could imply that future extensions are not out of the question. (Back to top)
When do commercial real estate lenders, including Freddie Mac and Fannie Mae, plan to stop lending based on LIBOR?
In February 2020, Fannie Mae and Freddie Mac announced that they will stop accepting LIBOR-based loan applications after the end of Q3 2020 and will stop purchasing LIBOR-based loans by the end of 2020. In Q2 2020, Fannie and Freddie released their LIBOR transition playbook, where they describe their plans to transition from LIBOR-based lending to lending based on the Secured Overnight Financing Rate (SOFR) compounded in advance. For additional information on the LIBOR transition and agency loans, read our LIBOR transition market brief.
To date, other popular floating-rate lenders (e.g., global investment banks, regional and community banks, non-bank lenders, insurance companies) have not established any clear time frames for transition. As of September 2020, Freddie Mac SOFR-based floating rates have begun to close, with Chatham placing the interest rate cap on the first SOFR cap on a Freddie financing early in the month. (Back to top)
In June 2017, the ARRC identified SOFR as the presumptive replacement rate for USD LIBOR. The New York Fed calculates SOFR by taking the volume-weighted median of transaction-level data from three sources: 1) tri-party repo data, 2) GCF Repo (General Collateral Finance repurchase agreements) transaction data and 3) bilateral Treasury repo transactions cleared through FICC’s DVP Service (Fixed Income Clearing Corporation’s Delivery vs. Payment Service).
A primary attraction for regulators is that, unlike LIBOR, SOFR is fully transaction based and therefore less susceptible to market manipulation. There are approximately $900 billion of actual market transactions supporting the daily calculation of SOFR. Conversely, USD LIBOR relies primarily on expert judgment of the LIBOR panel’s submissions to calculate this rate. The most actively traded USD LIBOR tenor is three months, and less than $1 billion of transactions typically support the calculation of this rate each business day, particularly in the current COVID-19 environment. There is a much more robust market supporting the calculation of SOFR.
While the New York Fed publishes spot SOFR daily, market convention is developing such that these daily settings will be compounded (commonly in arrears, though in advance for certain key segments of the market — notably, agency Freddie ARMs and Fannie SARMs) or averaged.
SOFR is a measure of the overnight cost of financing U.S. Treasury securities in the repurchase agreement (repo) market. It includes market data from bilateral trading (trimmed to exclude certain transactions using high-demand “on special” collateral) and the tri-party repo market. The dynamics driving pricing, volatility and risk in the U.S. Treasury repo market are therefore closely aligned with those driving SOFR levels.
The Fed’s Federal Open Market Committee is responsible for periodically setting targets for several key interest rates, enforced through open market operations. The New York Fed conducts both repo transactions and reverse repo transactions in the tri-party repo market to manage the level of reserves in the banking system to further support the transmission of monetary policy to the economy. In a repo transaction the NY Fed is a lender, providing reserves to Primary Dealers in what equates to a collateralized loan. In a reverse repo the NY Fed reduces reserves by effectively borrowing funds from the market. The Fed’s involvement in the repo markets, meant to ensure an orderly and liquid market, influences the SOFR rate by effectively setting both a floor and a ceiling on repo rates. When the Fed lends funds via repo, they implicitly provide an avenue for primary dealers to convert their Treasury and MBS holdings to reserves. This lending can act as a backstop, encouraging those dealers to lend out reserves to other market participants and thereby helping to ensure that repo rates don’t rise above the Fed’s targets. When the Fed borrows funds via reverse repo transactions they provide an alternative means for market participants to earn interest on their excess cash, which by design, keeps the Fed Funds rate from falling below the lower bound of the Federal Reserve’s target.
As a result of recent Fed actions, SOFR has averaged around five basis points since April 2020. Market uncertainty with respect to future Fed actions may introduce additional volatility to Treasury repo rates and SOFR. (Back to top)
What are some of the key challenges facing SOFR adoption (i.e., lack of term structure, alternative rates)?
The fact that SOFR is an overnight, secured, risk-free rate, as compared with LIBOR, an unsecured, forward-looking term rate, gives rise to challenges for the market to overcome.
- Lack of term structure: One of the key challenges facing SOFR adoption is the lack of a forward-looking term structure for SOFR, unlike the LIBOR market, which includes several tenors (e.g., one-month, three-month, etc.). SOFR is commonly compounded in arrears (i.e., backward-looking, compounding each setting over the course of the prior month) and as such presents challenges from an operational perspective because the parties won’t know the SOFR setting for a given interest period until the day after the period ends, when they know the final daily spot SOFR and can compound all of the daily rates. This operational challenge also impacts cash management, as payments may have to be delayed for several days and there is less time to provide notices and process payments, which could lead to late or missed interest payments. However, Freddie Mac and Fannie Mae recommend a SOFR convention that compounds the rate in advance to mitigate the impact of certain of these issues, though this gives rise to concerns that a compounded in advance rate is inherently stale because it lags the market.
- Eventually, we expect there to be a term structure for SOFR. Currently, the SOFR swaps and futures markets are not liquid or deep enough to reliably generate a SOFR term rate that is compliant with IOSCO’s benchmark principles. The ARRC expects there to be a term structure for SOFR by the end of 2021, but this could easily slip. There is hope in the market that the move to SOFR for cleared swap discounting in 2020 could be a step-change catalyst for the necessary liquidity.
- Additionally, the Fed has begun publishing 30-, 60-, and 90-day SOFR averages to help with bank system constraints around independently calculating compounded in arrears rates.
- Lack of credit sensitivity: Another key challenge is that some market participants — notably U.S. regional and community banks and financial institutions — have argued that SOFR does not reflect a typical bank’s borrowing or funding costs nearly as accurately as LIBOR because SOFR is a risk-free rate (RFR) that lacks credit sensitivity. Their concern is that SOFR potentially could reduce the availability of credit under market stress, and in response, others in the market have designed alternative rates to better reflect banks’ and financial institutions’ borrowing costs, including:
- American Interbank Offered Rate (AMERIBOR): published by the American Financial Exchange (AFX), an electronic exchange for over 1000 U.S. banks and financial institutions, AMERIBOR is designed to reflect these banks’ and financial institutions’ actual unsecured borrowing costs, calculated each day based on the average interest AFX users charge one another for unsecured overnight loans
- The ICE Bank Yield Index: published by ICE, the current LIBOR administrator, this index is designed to sit atop the implied term SOFR curve and serve as a measure of the average cost of funds for large international banks borrowing U.S. dollars for 1, 3 and 6-month tenors on an unsecured basis
- IHS Markit dynamic credit spread: this also is designed to sit atop SOFR and will be constructed using Markit’s proprietary credit reference data, including over three-million daily price quotes on credit default swap rates, among other data
More generally, challenges remain in the areas of accounting, tax, and legal, and regulators and standard setters continue to work to address them. (Back to top)
Cap provider banks have indicated that they currently can or soon will be able to offer caps and other interest rate derivatives, though spreads initially will be wide because of the lack of a liquid market. In fact, ISDA continues to highlight there is more work to do regarding non-linear products like caps and has formed an IBOR transition working group specifically tasked with thinking through implementation challenges related to non-linear products. (Back to top)
Transition of existing loans and derivatives
What are the main issues that must be addressed in transitioning a loan or derivative from LIBOR to SOFR?
The main issues in transitioning a given loan or derivative are:
- Fallback triggers: what will give rise to a transition from LIBOR?
- Fallback rates: what rate will replace LIBOR?
- Spread adjustment: how will the loan spread and derivative economics be adjusted to reflect any difference between LIBOR and its replacement rate? (Back to top)
How are fallback triggers, rates, and spread adjustments addressed in loan and derivative documents?
The ARRC has prepared a series of recommendations and draft documents to address these questions for loans. ISDA also has prepared recommendations that will inform documentation in development. They generally are aligned and address these issues as follows:
- Fallback triggers
- Cessation: public statements indicative of permanent discontinuation
- Pre-cessation: declaration that LIBOR is no longer representative, insufficient number of dealers providing quotes, et al.
- Fallback rates - this is one area in which the ARRC and ISDA are not entirely aligned
- ARRC: waterfall of term SOFR (if it exists), followed by Daily Simple SOFR, followed by an endorsed benchmark rate
- ISDA: SOFR compounded in arrears
- Spread adjustment: five-year median historical spread shifted by adding two banking days relative to the LIBOR period
With that, we’ve seen a variety of approaches across various types of lenders (e.g., global investment banks, regional and community banks, non-bank lenders, Freddie Mac and Fannie Mae), and many of these approaches have evolved time, meaning that a given lender’s transition language may look different in new or amended loans now, even as compared with how this language looked one or two years ago.
There are two broad approaches to addressing these issues in loan documents.
- Hardwired approach: Some in the market use loan fallback language that includes a specific rate, index, or the determination (or future determination) of a substitute rate by a specific committee or organization (such as the Fed, the ARRC, or ISDA). The ARRC recommended SOFR as its preferred substitute rate and released its “hardwired approach” to fallback language for syndicated loans (updated June 2020). This fallback language uses a decision waterfall based on SOFR to determine the substitute rate and supports the ARRC’s recommendation that syndicated loans begin using hardwired fallback language by the end of Q3 2020.
- Amendment approach: Others prefer to retain flexibility in their loans and include language incorporating whatever fallback rates are ultimately adopted by the marketplace. In April 2019, the ARRC released its “amendment approach” to fallback language for syndicated loans, allowing flexibility for loan parties to agree on the selection of a substitute rate and amend their existing documentation accordingly.
The ARRC’s recommendations are not mandatory, and most lenders have their own preferred form of LIBOR transition language. This language also has evolved over time, such that a given lender’s preferred form of transition language probably looks different now than it did a year ago.
On the derivatives side, ISDA has solicited public feedback and is preparing revised definitions and a documentation protocol to facilitate the transition for derivatives. The current expectation is that these documents will be released in Q3 2020, and they should largely be consistent with the various approaches recommended by the ARRC. (Back to top)
In the event of LIBOR’s discontinuation, ISDA’s existing benchmark fallback language, which contemplates temporary unavailability, rather than wholesale discontinuation/replacement, calls for the parties to request and average quotes from a group of banks; but in that scenario, it is likely that most banks would be unwilling to provide a quote on a permanently discontinued rate. This is one of the reasons that ISDA is undergoing a process to revise its definitions to include more robust fallback language. To the extent that the updated fallback methodology is incorporated into the terms of the existing trade, once fallback is triggered, the derivative will be updated to begin referencing the new fallback rate (e.g., SOFR). If an entity does not incorporate the revised ISDA definitions into the terms of its derivative, it remains to be seen how this will play out in practice. It is unclear what will happen if an entity does not, or refuses, to incorporate the updated fallback methodology into the terms of its transaction.
Chatham expects the majority of the market to use SOFR compounded in arrears, with a lookback to the SOFR from two days earlier, for the derivatives fallback rate. Unfortunately, it’s too early to tell how the volatility markets will develop; data necessary to calculate volatility and convexity isn’t readily available given how new SOFR is. Nearly all the regulators’ focus at this stage has been on determining rates and calculating payments, as compared with related issues like volatility markets. This presents challenges not only for caps but also for calculating XVA (Credit Valuation Adjustments, Debit Value Adjustments, Funding Value Adjustments, etc.) on other products like swaps. CME began offering SOFR options on 3-month SOFR futures earlier this year. The availability of option products will allow for volatility markets to develop. (Back to top)
One significant open question is whether loans and hedges can convert in such a way as to minimize unnecessary cost to a borrower. The answer lies in whether the transition language in the loan and cap or swap are consistent in terms of the fallback trigger, fallback rate, and spread adjustment. If any of these do not match, there could be a negative impact to a borrower, particularly those sensitive to hedge accounting treatment.
While there remain differences between the lending and derivatives markets at this stage, there have been recent steps towards harmonization of approaches. For example, in June 2020, the ARRC announced that it would recommend alignment with ISDA on the value of the spread adjustment to USD LIBOR as well as the timing of when the spread adjustment will be determined.
If any differences between lending and derivatives markets continue through implementation, they could drive market participants to negotiate bilateral adjustments to their derivative transactions (to match their hedged items) rather than adhering to the new ISDA protocol as a standardized practice. This concern about the need for consistency has been echoed by other stakeholders responding to ISDA’s public consultations regarding fallback methodology and pre-cessation triggers. End users need to be aware of the potential for mismatch and what that could mean from a risk perspective, advocating and pushing for change where necessary to minimize the gap. (Back to top)
GAAP requires extensive analysis of contract modifications, the results of which can lead to current P&L impacts and loss of hedge accounting. Revenue, leasing, debt, loans, and derivatives are all impacted by these analyses. FASB recently issued Topic 848 which disregards these analyses as long as the modifications relate solely to reference rate reform. Additionally, hedged accounting may continue while there is still uncertainty about how the contracts will ultimately transition to an alternative reference rate. Without this guidance hedge accounting for interest rate exposures would be lost by all market participants.
FASB issued Topic 848, Reference Rate Reform in March 2020. Topic 848 is a set of exceptions and practical expedients to current GAAP for contracts that are affected by reference rate reform. These exceptions and practical expedients treat the amendment of these contracts as a modification or continuation of the contract, as opposed to a termination. Additionally, Topic 848 extends practical expedients to allow hedging relationships to continue and to temporarily ease certain of the effectiveness assessment requirements. These expedients may only be applied if all of the contractual changes relate to reference rate reform, which will require documentation of the contractual changes and the election of the expedients.
IASB issued Phase 1 of its relief in September 2019 while the deliberations for Phase 2 began in Q4 2019. Phase 1 provides guidance relating to pre-replacement issues that impact hedge accounting, such as the probability assessment for cash flow hedges; prospective and retrospective assessments of effectiveness; and separately identifiable risk components. Phase 2 will focus on replacement issues including contractual amendments and reformation of an index. The forms of relief provided by Phase 2 will not be optional and are expected to address similar issues as under U.S. GAAP. (Back to top)
For derivatives designated in hedge accounting relationships, a modification to the critical terms of a derivative requires that the hedge accounting relationship be discontinued. A new hedge accounting relationship can be established for the modified derivative if new accounting documentation is put in place. However, this revised hedge accounting relationship is more complex to account for and typically requires a more sophisticated approach. Optional expedients are available to overcome the requirement to re-designate the hedging relationship.
Fundamental to cash flow hedging relationships is the expectation that the future hedged transactions are probable to occur. Given the current definitions of hedged transactions, amended contracts that reference a new index would not qualify and hedge accounting would need to cease. Topic 848 allows an entity to assume that the derivative and exposure will transition to the replacement rate at the same time.
For fair value hedges, the value assigned to the hedged debt will need to be updated for the change in the reference rate, though no specific approach is mandated in Topic 848.
Effectiveness assessments are also impacted. There are several simplified approaches that would become invalid upon amendment of the derivative or hedged exposure. Topic 848 provides a range of optional expedients that will allow an entity to change assessment methods or ignore certain elements in the assessment. Quantitative effectiveness assessments may require market data that is not available and reasonable proxy data may be appropriate. (Back to top)
When a debt contract is modified it must be analyzed to determine whether the change in cash flows indicates that the modification is in substance an extinguishment of the old contract. If deemed extinguished, any unamortized debt issuance costs must be recognized in current period earnings. Topic 848 provides relief in this area and waives the requirement to assess modified debt if the only modification is to reference rate reform related changes. (Back to top)
Upon issuance and modification, all contracts must be analyzed for embedded derivatives. Both qualitative and quantitative factors are considered to determine whether the embedded derivative should be accounted for separate from the host contract.
Topic 848 grants relief so that amendments related to reference rate reform will not trigger analysis of embedded derivatives.
New contracts will pass through the existing requirement to analyze embedded derivatives, though the market data for a new reference rate may not be robust enough initially to complete the analysis. In this case, a reasonable proxy may be appropriate.
Lessees carry most leases on the balance sheet as a liability with an associated right-of-use asset, while certain leases are off balance sheet. A modification in the contract requires a reassessment of this classification. Topic 848 grants relief for this reassessment.
Certain long-duration construction contracts are recognized in earnings based on a percentage of completion. Amendment of the contract requires a reassessment of the amount recognized in earnings and possibly a new pattern of recognition in the future. Topic 848 provides relief for this analysis if the modification is solely due to replacement of a reference rate. (Back to top)
Over the last two years, the Securities Exchange Commission (SEC) has encouraged entities to include additional disclosure in their filings to discuss the impact of reference rate reform. This disclosure should likely reside in the Management Discussion and Analysis section of financial statements. The SEC suggested the following disclosure:
- Population of contracts that extend past 2021 that reference LIBOR and the plan to convert those contracts.
- The actions that are needed to mitigate the exposure to LIBOR cessation.
- The expected impact on profitability.
- The expected impact on the effectiveness of the company’s hedging strategy.
- Disclosure that allows investors to see the issue through the eyes of management.
- The impact on business, systems, processes, risk management, and clients.
The SEC welcomes pre-filing consultation so companies can get the level of disclosure right. (Back to top)
What does Chatham recommend?
Chatham generally recommends being proactive with respect to the LIBOR transition. Many organizations are early into their LIBOR transition plans. However, there is not much time between now and the end of 2021 (or sooner), when LIBOR may not function or exist as a benchmark rate, which doesn’t leave much time for this massive transition, especially with some key details yet to be determined.
Chatham recommends that all LIBOR-based borrowers do the following:
- Review and inventory their loans and associated derivatives as to trigger, fallback, and spread adjustment language (or lack thereof) as soon as possible
- Incorporate more robust fallback language into their loans (see Chatham’s recommendations)
- Monitor the LIBOR transition, specifically including:
- issuance of non-LIBOR indexed debt for signs of preparedness on the part of lenders and increased appetite from lenders and investors for exposures to benchmarks other than LIBOR
- the major U.S. clearinghouses’ (LCH and CME) incorporating SOFR into their valuation and collateral calculations for cleared USD interest rate swaps in October 2020, and the subsequent impact on SOFR derivatives activity
- Understand transition guidance and any relief afforded
- Assess potential regulatory scrutiny as to various entities within an organization
Chatham further recommends that LIBOR-based borrowers who hedge their interest rate exposure with OTC caps, swaps, etc., monitor the release of revised ISDA definitions and the ISDA protocol, along with any bilateral agreements issued by ISDA or specific lenders/hedge providers, to determine the optimal hedge fallback mechanism for their specific situation. Those who hedge with cleared derivatives should prepare a more immediate impact of the “clearinghouse big bang” and should prepare accordingly. (Back to top)
LIBOR-based borrowing/hedging is by far the most prevalent among our real estate, private equity, and corporate client bases. These clients use LIBOR swaps, caps, and swaptions to hedge floating-rate loans and future issuance or refinancing of fixed-rate debt. Most of our clients focus on ensuring flexibility for LIBOR fallbacks and cessation events in loan documentation. Some clients have included trigger language in derivative trade confirmations for longer-dated trades, likewise focusing on flexibility and commercial reasonableness. As for financial institutions, we’ve seen many of our clients move away from LIBOR-based balance sheet hedging programs to Fed Funds based programs.
In addition, it presently appears that a term SOFR may not become available until after the end of 2021. If the markets develop sufficiently to borrow and hedge at SOFR compounded in arrears (or compounded in advance, as appropriate) prior to term structure availability, it would be safest not to wait for a term structure. (Back to top)
What LIBOR transition-related resources are available?
- Chatham Financial has prepared the following resources:
- The New York Fed publishes the following SOFR rates each business day at 8 a.m. EST:
- Some of the key players in LIBOR transition have published the following
- ARRC: Recommended Best Practices for Completing the Transition from LIBOR (May 2020)
- Fannie Mae and Freddie Mac: LIBOR Transition Playbook (June 2020)
- ISDA: Benchmark Reform and Transition from LIBOR (first published May 2020)
- FASB: Reference Rate Reform
Speak to a Chatham expert
Please reach out to the Chatham team if you have questions around the USD LIBOR transition or how use of SOFR in your loans and derivatives could impact your interest rate exposure.
Chatham Hedging Advisors, LLC (CHA) is a subsidiary of Chatham Financial Corp. and provides hedge advisory, accounting and execution services related to swap transactions in the United States. CHA is registered with the Commodity Futures Trading Commission (CFTC) as a commodity trading advisor and is a member of the National Futures Association (NFA); however, neither the CFTC nor the NFA have passed upon the merits of participating in any advisory services offered by CHA. For further information, please visit chathamfinancial.com/legal-notices.
Transactions in over-the-counter derivatives (or “swaps”) have significant risks, including, but not limited to, substantial risk of loss. You should consult your own business, legal, tax and accounting advisers with respect to proposed swap transaction and you should refrain from entering into any swap transaction unless you have fully understood the terms and risks of the transaction, including the extent of your potential risk of loss. This material has been prepared by a sales or trading employee or agent of Chatham Hedging Advisors and could be deemed a solicitation for entering into a derivatives transaction. This material is not a research report prepared by Chatham Hedging Advisors. If you are not an experienced user of the derivatives markets, capable of making independent trading decisions, then you should not rely solely on this communication in making trading decisions. All rights reserved.19-0239
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