In the three months since our Legal Update of June 20, 2019,1 our prediction about the adoption of LIBOR fallbacks consistent with the recommendations of the Fed’s Alternative Reference Rates Committee (ARRC) has proven correct.
Again relying on publicly available information, 51 new credit agreements incorporating the ARRC’s Amendment Approach, from 46 unique borrowers, have been filed with the US Securities and Exchange Commission (SEC) since our prior update—almost one every business day, compared with one every 3-4 business days during the one-month period reviewed previously. Furthermore, the nature and number of lenders has changed significantly. The very earliest few filings, prior to the ARRC releasing their final recommendations for LIBOR fallback language, involved alternative lenders almost exclusively, and the filings reviewed in our prior update involved only three traditional lenders, with Wells Fargo acting as administrative agent in five of the seven. In contrast, the recent SEC filings reflect 16 unique and primarily global lenders, with the most active administrative agents being Wells Fargo (20 filings) and Bank of America (12 filings).
As was the case in June, to the extent that the market is incorporating the ARRC’s fallback language, market participants have generally adopted the Amendment Approach, with minor variations in the applicable text. We are not aware of any filed agreements implementing the ARRC’s Hardwired Approach.
It is a good sign that market acceptance of ARRC-recommended LIBOR fallback language is accelerating and that the issue of LIBOR replacement is being addressed by a broader group of market leaders.