Breakage and Yield Protection in a Post-LIBOR World

This Legal Update discusses the origins of the London interbank offered rate (LIBOR) as a “cost of funds” rate, two pricing theories that are reflected in contractual provisions for LIBOR-priced loans, the likely replacement of LIBOR with the Secured Overnight Financing Rate (SOFR), and the applicability of those contractual provisions in SOFR-priced loans.