FASB clarifies reference rate reform rules accountingtoday.com - get the latest breaking news, showbiz & celebrity photos, sport news & rumours, viral videos and top stories from accountingtoday.com Daily Mail and Mail on Sunday newspapers.
Finance executives also need to deal with existing contracts that cite Libor. That can be tricky especially in cases where some of these debt instruments are held by hundreds of investors who all need to agree to the changes. Transaction lawyers suggest that finance chiefs create an inventory of agreements that reference Libor, and take a look at when they run out and who the other party is. The cut-off date for existing contracts to stop referencing Libor is June 30, 2023.
“The issue for treasurers and CFOs is managing the transition across the whole company,” said Michele Navazio, a partner at law firm Seward & Kissel LLP. “It is not going to happen simultaneously, which could add to the complications.”
Wednesday, December 23, 2020
The Securitization Disclosure and Document Updates for 2020 and 2021 panel featured Structured Finance and Securitization partners Prachi Gokhale, Christina Burgess, Josh Yablonski and Joe Topolski and was moderated by partner John Keiserman. The discussion ranged from the effects of the COVID-19 pandemic on the structured finance industry, to the eventual cessation and replacement of the London Interbank Offered Rate (LIBOR), and concluded with an outlook to recent securities law changes that will affect offerings in 2021 and beyond. Here are the top five takeaways from the panel.
Impact of COVID-19 on Risk Factors
The COVID-19 pandemic has had a far-reaching impact on the disclosure for asset-backed securities offerings and has brought about several changes throughout the year, in particular to the disclosed risk factors. Most issuers prominently featured pandemic-specific risk factors in their disclosure documents, which focused on the u
Monday, December 21, 2020
The current deadline for the cessation of the London Inter-Bank Offered Rate (LIBOR) is the end of 2021. The transition away from LIBOR is, however, a moving target, and its status is constantly changing.
Why Move Away from LIBOR?
LIBOR and other inter-bank offered rates rely on liquidity in the relevant market, where a shortfall in supply causes an inaccurate reflection of that rate. Coupled with the 2012 LIBOR-rigging scandal, there has been a very public move from LIBOR towards Risk-Free-Rates (RFRs).
Alternatives
Working groups, think tanks and interested parties have mobilised globally to deal with the transition. In the United Kingdom, the Working Group on Sterling Risk-Free Reference Rates’ frontrunner is the Sterling Overnight Index Average (SONIA), an average of the rates at which banks pay to borrow sterling from other financial institutions overnight.