LIBOR transition and tough legacy contracts—what are the solutions?

LIBOR transition and tough legacy contracts—what are the solutions?

The Tough Legacy Taskforce, established by the Working Group on Sterling Risk Free Rates has published its long awaited ‘tough legacy’ paper. The paper considers options for dealing with those contracts that currently reference London Interbank Offered Rate (LIBOR) but which may be particularly difficult to transition to risk free rates before the end of 2021. This News Analysis explains why tough legacy contracts are such an issue, highlights key points made in the paper and sets out practical recommendations.

The Tough Legacy Taskforce (the Taskforce) was established to provide market input to help identify issues around ‘tough legacy’. In May 2020, the Taskforce published a paper on the identification of Tough Legacy issues.

The paper makes it clear that firms need to deal with contracts referencing LIBOR primarily through:

  • amending the contract to reference a suitable alternative rate (typically the recommended risk-free rate for the currency), or
  • using a robust fallback that enables the contract to move to a suitable alternative rate upon an appropriate event (eg as International Swaps and Derivatives Association (ISDA) are doing with their revised documentation)

However, it acknowledges that this may be very difficult or impossible for certain contracts, the so-called ‘tough legacy’.

The paper starts by setting out its recommendations, before highlighting particular issues for the various markets that use LIBOR.

Why do 

Subscription Form

Already a subscriber? Login
RELX (UK) Limited, trading as LexisNexis, and our LexisNexis Legal & Professional group companies will contact you to confirm your email address. You can manage your communication preferences via our Preference Centre. You can learn more about how we handle your personal data and your rights by reviewing our  Privacy Policy.

Related Articles:
Latest Articles:

Access this article and thousands of others like it free by subscribing to our blog.

Read full article

Already a subscriber? Login

About the author:

Miranda is a solicitor specialising in leveraged and acquisition finance. She trained at Hogan Lovells International LLP and qualified into the international banking and finance team. During her time at Hogan Lovells she worked on a variety of domestic and cross-border transactions, acting for both borrowers and lenders. She also experienced secondments to Barclays Bank PLC and Kaupthing Bank hf.