Seems we have been awaiting the death of LIBOR for years, and this benchmark measure of applicable interest rates in loans formally expires at the end of 2021. Of course, credit facilities entered into today quite often extend beyond that date; how is interest to be calculated per an agreement entered into today but relating to a period after LIBOR is gone?

Historically there have been two approaches per the US Commission dealing with this per the Fed: kick the decision down the time line (“amendment”) to see what makes sense nearer the end, or fix the replacement rate now (“hardwired”). The former provides flexibility but also will cause a mechanical crunch near the last date; the latter makes life easier but is indeed hard-wired.

In June the Committee stopped recommending the amendment approach, opting for hardwired present decision making. There is also the option to kick in the new measure before LIBOR dies.

The new available metrics are still up in the air, however. Variants of something called SOFR are being discussed; the details are beyond our scope and today possibly arcane to all but those involved in syndicated loans. But for those who are doing smaller loans with maturities that implicate the death of LIBOR, I offer the following suggestion (which is music to the ears of lawyers): better consult with your attorney.