The ARRC’s Final Recommendations for New Fallbacks for LIBOR Securitizations

On May 31, 2019, the Alternative Reference Rates Committee (“ARRC”) published “ARRC Recommendations Regarding More Robust Fallback Language for New Issuances of LIBOR Securitizations” (“ARRC Recommendations”). The ARRC Recommendations include a definition of what constitutes a cessation of LIBOR and provide a “waterfall” of replacement rates to be used when LIBOR is no longer published or is no longer representative. The waterfall of spread adjustments, designed to adjust for the differences between the replacement rate and LIBOR, was also finalized, although the method of calculation for two of the adjustments has not yet been fully determined. This Legal Update provides details on the ARRC Recommendations and discusses their impact on new LIBOR securitizations.