We know that 2020 was a challenging year and reminded us all that we are in an ever-evolving business environment. In 2021, we continue to face unprecedented scenarios, and there’s still a long road ahead.
The world of broadly syndicated lending faces unique challenges in periods of distress. These challenges can arise when corporate borrowers face liquidity issues affecting their ability to meet the provisions of loan agreements or make payments. They can also emerge more systemically in the case of macroeconomic turbulence that affects spending or credit markets.While COVID-19 may have seemed a harbinger of distress, we found that other less intuitive trends took hold in loan markets.
Progress in LIBOR transition continues to unfold, with cessation dates of December 31, 2021 in the UK and June 30, 2023 in the US. Those dates are now are extremely unlikely to move given the latest announcements from the UK’s FCA (for a guide to acronyms used in this article, see below) and ICE. Simply put, SOFR and SONIA are rapidly coming into force.Progress on USD LIBOR in recent months has included ARRC recommendations around hardwired fallback provisions and triggers.