LIBOR Transition

IBOR

Clients turn to Ropes & Gray’s cross-practice IBOR transition team for comprehensive guidance on IBOR transition preparation, including the wide-ranging impact of market and regulatory developments.

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Overview

Ropes & Gray is well positioned to assist clients with all aspects of preparation for the end of the London Inter-Bank Offered Rate (LIBOR) as well as other key inter-bank offered rates (together, the IBORs) and the transition to risk-free rates. We offer a comprehensive approach across multiple practice groups, with members in the United States, Europe and Asia.  We seek to provide timely updates on market and regulatory developments and help clients evaluate and understand the impact of these developments on their business, investments, contracts, disclosure documents and more. 

Our IBOR transition team advises clients such as corporations, investment funds, institutional investors, private equity sponsors and other asset managers—in their capacities as borrowers, lenders, investors and issuers—across a wide range of industries, asset classes and geographies. Our capabilities and experience, further described under the “Experience” tab, include:

  • Assisting asset managers with all aspects of transition preparedness, including assessment of impacts across an adviser’s business and updates to disclosure documents, marketing materials, contracts and service provider arrangements.
  • Advising clients on the impact of the transition on derivatives transactions, including negotiation of amendments to trading agreements to incorporate fallback provisions and advice regarding ISDA’s IBOR Fallbacks Protocol.
  • Advising clients on the U.S. and U.K. tax consequences of amendments made to financing agreements to implement the transition.
  • Reviewing loan agreements and other debt instruments—as both borrower and lender counsel—and advising clients as to how those agreements should be amended to best prepare for the transition.
  • Advising clients on “tough legacy” contracts, as well as related litigation risks.
  • Advising sponsors (as borrowers under commercial real estate financings for their equity holdings) and commercial real estate lenders (as borrowers under warehouse and other secondary market financings for their debt holdings) on various aspects of the transition and its impact on commercial real estate.
  • Helping clients of all kinds to assess, plan for, and manage their litigation risk.

Experience

Asset managers face a wide range of issues in preparing for the IBOR transition, including client relations, business, operations, regulatory, compliance, legal, risk and investment matters. 

Our attorneys advise clients on disclosures in their regulatory filings and other documents regarding the risks associated with the IBOR transition. We can assist managers in updating fund documents, marketing materials, and contractual and service provider arrangements.

The U.S. Securities and Exchange Commission’s Office of Compliance Inspections and Examinations (OCIE) has indicated that it expects to conduct thorough reviews of the plans registered advisers have formulated to address exposure to LIBOR-linked contracts. We can help clients plan for the LIBOR transition in light of this alert, as well as prepare for and respond to OCIE examination requests regarding transition preparedness. Please see our recent podcast for more information about the recent OCIE risk alert..

Ropes & Gray’s derivatives & commodities team has closely followed developments regarding the IBOR transition over the past several years. Well versed in all aspects of the transition, our team can assist in identifying IBOR exposure in contracts; reviewing, drafting and negotiating relevant trading agreements; and advising on the implementation of contractual fallbacks.

We can guide clients through ISDA’s 2020 IBOR Fallbacks Protocol, including advising on the implications of adhering (or not adhering) to the protocol and the mechanics of adherence. We can also advise on alternative approaches to incorporating appropriate IBOR fallback provisions in derivatives documentation, including review and negotiation of bespoke bilateral amendments to trading agreements.

Our team works closely with other Ropes & Gray practice groups to customize and coordinate IBOR transition efforts. For example, we work with our finance team to ensure consistency in a client’s transition approach with respect to interest rate hedges and any related loan agreements or debt instruments. Please see our recent podcast for more information about this topic..

With two Ropes & Gray lawyers serving as members of the LSTA’s SOFR Working Group, we are well positioned to provide timely updates on market and regulatory developments relating to the LIBOR transition for leveraged loans and other cash products. These updates include guidance and other announcements made by the ARRC, the Federal Reserve Board and other governmental agencies.  We are available to help clients evaluate and understand the impact of these developments on their debt agreements and other contracts that reference LIBOR. 

Our team also reviews loan agreements and other debt instruments, and advises clients as to how those agreements should be amended to best prepare for the transition away from LIBOR. As counsel to both borrowers and lenders, we are well equipped to provide practical and commercial advice to clients in negotiating LIBOR transition provisions. 

As the market moves toward a standardized approach to the transition away from LIBOR, we can help clients understand the adequacies and shortfalls of those solutions, and provide guidance as to additional steps clients may need to take to fully protect themselves from risks inherent in moving from LIBOR to a new reference rate.  

Often the best strategy for any litigation is to take those prudent steps beforehand that best position a party to avoid the litigation altogether. Working with cross-practice group teams, Ropes & Gray’s litigators are helping clients to see around corners, anticipate, and, where possible, take the necessary steps to avoid (or at least minimize) the risk of the kinds of litigation that are almost certain to follow the demise of LIBOR.

By helping clients to understand the kinds of claims that are likely to follow the retirement of LIBOR, and to catalog and assess their own litigation risks resulting from these anticipated claims, Ropes & Gray litigators are helping clients plan for and potentially avoid LIBOR-related litigation risk. Where that is not possible to avoid litigation, Ropes & Gray’s litigators are prepared to defend vigorously any claims that might be brought. Likewise, in those situations where reasonable planning and negotiations cannot mitigate the risks associated with LIBOR’s demise, Ropes & Gray’s litigators can develop an affirmative litigation strategy to help the client achieve the certainty and commercially reasonable results it desires. 

As counsel to both sponsors (as borrowers under commercial real estate financings for their equity holdings) and commercial real estate lenders (as borrowers under warehouse and other secondary market financings for their debt holdings) across currencies and jurisdictions, we have a wide range of experience in advising on the LIBOR transition across multiple sectors of the commercial real estate industry.      

We offer clients cross-practice perspective on managing the LIBOR transition across multiple asset tiers and capital sources, including debt holdings, corresponding warehouse and other secondary market financings, and related hedging and swap arrangements.

With the breadth and depth of our experience, we are well positioned to provide market-informed advice to clients preparing for the LIBOR transition. 

With team members in the United States, Europe and Asia, we have the sophisticated tax knowledge and geographical scope necessary to advise clients on the U.S. and U.K. tax consequences of amendments made to financing and derivative agreements to implement the IBOR transition. 

With regard to U.K. tax, we advise clients on: 

  • The U.K. tax consequences of amendments made to financing and derivative agreements to implement the IBOR transition.
  • The U.K. VAT, withholding tax and corporation tax consequences of any payments made in connection with the IBOR transition.
  • The appropriate way for U.K. clients to structure the IBOR transition to protect existing tax rulings and other benefits and avoid the need to redo withholding tax filings.

With regard to U.S. tax, we advise clients on:

  • The U.S. tax consequences of amendments made to financing agreements to implement the IBOR transition.
  • The U.S. tax consequences of IBOR transition for derivative instruments, including adherence to ISDA protocols.
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