IFLR Examines the Impact of a Synthetic Rate on LIBOR’s End

June 08, 2023

Cadwalader partner Lary Stromfeld, leader of the firm’s LIBOR team, was featured in an IFLR story that looks at the UK Financial Conduct Authority”s (FCA) decision to enable the use of a synthetic US dollar LIBOR rate in some tenors, thus providing what one observer called “a temporary bridge” for legacy contracts that have not been transitioned from LIBOR.

Stromfeld told IFLR: “The primary focus of the FCA’s action is legacy USD LIBOR contracts that aren’t governed by US law. The regulator has previously acknowledged that most legacy US law contracts would transition away from LIBOR under workable contractual fallbacks – such as those published by the ARRC [Alternative Reference Rates Committee] or implemented through ISDA’s protocol – or pursuant to the federal LIBOR Act.”

The story also looked at ARRC and ISDA fallback provisions that as well as the LIBOR Act’s guidance on legacy contracts within its scope.

Stromfeld explained: “However, there are certain legacy contracts governed by US law that do not fall into either of those categories, such as those that fallback to the prime rate when LIBOR is ‘no longer available’ or similar language. The language of these contracts will need to be analysed closely to determine whether the conditions to implement a specific replacement rate are fulfilled, or whether the synthetic version of USD LIBOR should apply.”

You can read the full article here (subscription required).