On 25 May 2023, the LMA published its exposure draft term SOFR documentation as recommended form. The related term SOFR commentary has also been updated. 

The move to recommended form follows the increasing use in the market of the term SOFR provisions in the exposure drafts, market feedback received, the length of time since publication of the exposure drafts and the impending end-June 2023 deadline for US dollar LIBOR transition. Note that, as with all LMA recommended forms, these are non-binding and parties are free to depart from their terms.

In respect of fallbacks to term SOFR, the options presented remain suggestions only given some ongoing discussions in the market. However, market participants are reminded of recent regulatory statements, including from the Financial Stability Board, that contracts referencing term RFRs need to have robust fallbacks in place. Market participants are also reminded that cost of funds is only included in the recommended form term SOFR documentation as a potential option for an ultimate fallback. Cost of funds is not designed to be used as a primary fallback given that it is not a robust, scalable or workable long-term fallback.    

On 25 May 2023, we published three new modules within our 'Transition to RFRs' e-learning course.

The new modules (building upon two prior modules released in August 2022) introduce Compounded Risk-Free Rates (RFRs) and the practical implications for calculating loan facilities' interest. The additional modules include:

Compounded RFRs – The Basics: this module provides a high level overview of Compounded RFRs, introducing the basics principles and building blocks that underpin Compounded RFRs.

Compounded RFRs – Observation Shift: this module explains Compounded RFRs in further detail, highlighting the difference between loan facilities with and without an Observation Shift using worked examples.

Compounded RFRs – CCR & NCCR: this module introduces, with worked examples, the concepts of Cumulative Compounded Rate (CCR) and Non-cumulative Compounded Rate (NCCR).

Please note that these modules are intended to be completed in the order noted above and steadily build upon the principles and building block introduced in prior modules.

Click here to enrol.

On 4 May 2023, we published model provisions for sustainability-linked loans (SLLs). These model provisions look to provide a proposed form of draft SLL provisions for inserting into LMA loan documentation, which are aligned with our Sustainability-Linked Loan Principles and accompanying Guidance notes.

Put together by an experienced working party of financial institutions and law firms active in sustainable finance, these model provisions seek to reflect current market practice, and provide a vital tool to protect the integrity of the SLL market by providing a basic drafting framework to assist parties in the negotiation of the document.  The model provisions also include extensive drafting notes setting out points for parties to consider when undertaking a SLL transaction.

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Watch our webinar, first streamed live on 17 May, on "Transition from IBOR in the loan market; where are we now" presented by Kam Hessling and Keith Taylor. It covers: recent developments, including the FCA announcement on synthetic USD LIBOR and ARRC announcement on term SOFR use cases; where we are now on loan market transition; developments and timelines in other key IBOR jurisdictions; and what loan market participants need to be doing with limited time left. The webinar closed with a Q&A, with Keith and Kam answering questions sent in from delegates during the live transmission.

As part of the run up to our 9th real estate finance conference being held in London , we surveyed our membership on the opportunities and challenges facing real estate finance markets. The survey aimed to determine where the key investment opportunities and challenges lay, which sectors and asset classes were most likely to drive future growth and where future lending would most likely be sourced from.

The results were collected anonymously and represent the personal views of professionals actively working in the real estate finance market.