Loan Contract Amendment (Hardwired LIBOR Fallback Language Referencing SOFR)
About this template
This legal template serves as an amendment to an existing loan contract governed by United States law. The purpose of this amendment is to introduce hardwired language that incorporates a LIBOR fallback provision referencing the Secured Overnight Financing Rate (SOFR).
The template provides a framework for modifying the loan contract to address the impending discontinuation of the London Interbank Offered Rate (LIBOR) as a benchmark interest rate. LIBOR has historically been used as a reference rate for many financial transactions, including loans. However, due to concerns of manipulation and declining market activity, global regulators have announced that LIBOR will be phased out by the end of 2021.
To ensure a smooth transition to an alternative benchmark rate, this template introduces hardwired language that establishes the Secured Overnight Financing Rate (SOFR) as the fallback rate. SOFR is a benchmark rate recommended by the Alternative Reference Rates Committee (ARRC) in the United States. It reflects the cost of borrowing secured overnight in the repurchase agreement market and is considered a more reliable and transparent reference rate.
The loan contract amendment template under USA law outlines the specific clauses and provisions necessary to implement this LIBOR fallback language referencing SOFR. It may include sections covering the definitions and interpretations of key terms, the methodology for determining the fallback rate, the mechanics of the transition, and any necessary modifications to interest calculation, payment terms, or other relevant provisions.
By utilizing this template, parties involved in a loan agreement can ensure compliance with regulatory changes and mitigate the potential risks associated with the discontinuation of LIBOR. The amendment seeks to provide clarity, transparency, and a seamless transition to a new benchmark interest rate, SOFR, in line with industry best practices and regulatory recommendations under USA law.