The Alternative Reference Rates Committee (“ARRC”) issued (i) updated recommended contractual fallback language for U.S. dollar LIBOR-denominated bilateral business loans; and (ii) a technical reference document to support previously released conventions for syndicated loans.
The ARRC updated the bilateral business loan fallback language revising the language released in May of 2019. Specifically, the updates (which the ARRC noted are similar to recommendations for new originations of syndicated loans) amended the (i) “Hardwired Approach” to include a recommended use of the Daily Simple Secured Overnight Financing Rate in the “second step of the waterfall” and (ii) “Hedged Loan Approach” by including a benchmark rate floor.
Separately, the ARRC explained that the technical reference document includes discussion of different lookback periods and other potential methodologies that the ARRC considered. The document also contains sample calculations of daily cash flows and interest accruals.