Cadwalader’s David Burkholder Discusses 'SOFR as the New LIBOR' as a Panelist at CRE Finance Council’s 2019 Annual Conference

Jun 17, 2019

Cadwalader partner David Burkholder participated in a panel discussion titled “Will it Float?: SOFR as the New LIBOR” at the CRE Finance Council’s 2019 Annual Conference in New York on June 11.

The event annually gathers professionals in the commercial real estate finance industry, including balance sheet and securitized lenders, loan and bond investors, private equity firms, servicers and rating agencies among others.

Burkholder, who practices in Cadwalader’s Capital Markets Group, was joined by the following panelists: Ann Battle, Assistant General Counsel, International Swaps and Derivatives Association, Inc.; Jason Granet, Managing Director, Goldman, Sachs & Co; Leslie Hayton, Managing Director, Wells Fargo; Gary Horbacz, Principal, PGIM Fixed Income; Peter Phelan, Deputy Assistant Secretary for Capital Markets, U.S. Department of the Treasury; and moderated by Raj Aidasani, Senior Director, Research, CRE Finance Council.

The panel reviewed the key differences between LIBOR and the developing Secured Overnight Funding Rate (SOFR), the issues involved with establishing a term SOFR rate, and the operational challenges presented by the transition. Some key discussion points included:

  • The transition work facing market participants, including the need to assess their individual exposures to LIBOR and develop concrete plans to address its eventual cessation; and to study the securitization working group’s fallback language that was recently published by the Federal Reserve's Alternative Reference Rates Committee (ARRC), and how it can be implemented in future transactions
  • The process of developing a term rate for SOFR, including the importance of market participants’ involvement to create the necessary transactional data to support its publication
  • The significant operational hurdles that will require collective and coordinated activity by market participants to ensure the transition to a SOFR-based rate can occur with minimal market disruptions
  • The benefits to market participants of originating loans and financial instruments based on SOFR now, to avoid the risks associated with having to convert from LIBOR to a SOFR-based rate in the future

“The end of LIBOR has the potential to create considerable market disruption without significant and coordinated efforts across the global financial markets,” Burkholder said. “CREFC’s annual conference gave commercial real estate finance professionals an important opportunity to discuss both the immediate and longer-term steps required of them for a successful transition, both on an individual entity level and as a coordinated market sector.”

Burkholder is a member of Cadwalader’s LIBOR Preparedness Team. His practice focuses on commercial mortgaged-backed securitization transactions, structured mortgage loan participations and warehouse lending. He also has experience in work-outs of non-performing commercial mortgage loans in CMBS transactions and in other distressed asset sales, as well as extensive experience negotiating and drafting securitization offering documents, pooling and servicing agreements, indentures, underwriting agreements, mortgage loan and other asset sale agreements, and warehouse and repurchase facility documentation.

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