Add AXDRAFT to your tool kit to meet the change by the time LIBOR ends, and navigate the shift at a comfortable pace.
Add AXDRAFT to your tool kit to meet the change by the time LIBOR ends, and navigate the shift at a comfortable pace.
Get thousands of LIBOR transition amendments done in less than 2 weeks
LIBOR is an interest rate benchmark used as a reference for providing adjustable-rate consumer financial products (mostly loans and mortgages).
For decades LIBOR has given banks a secure and reliable groundwork for loan granting, resulting in millions of contracts worth over $240 trillion referencing this index.
Yet in 2021 it has been decided that LIBOR needs to be abandoned for safer and more credible benchmark rates due to the following reasons:
This process became known as LIBOR transition. Its magnitude is driven by millions of deals hinging on the floating interest rates that now need to be revisited.
LIBOR cessation will take place within the following timeframes:
December 31, 2021 – for 1-week and 2-month USD LIBOR
June 30, 2023 – for non-USD LIBOR and for 3-month, 6-month and 1-year USD LIBOR
Roadmap to move your contracts away from LIBOR
LIBOR transition calls for massive updates to the operational and accounting systems, which need to be reflected in the legal contracts, both new and existing.
This places the revisions of contracts that mature after 2021 at the heart of the shift. And while the approaching deadline multiplied by the number of affected contracts needing amendment may leave you second-guessing whether you’re going to make it through safely, we can assure you that you will.
Here’s how you start:
Gather all affected contracts and templates in a single place. Make sure they are easily accessible and searchable.
Analyze the contracts for potential risks and weak or missing fallback language (no fallback trigger event/benchmark replacement rate/benchmark adjustment).
Categorize your contracts based on the level of risk they pose to your company (high-risk, medium-risk, low-risk).
Build a LIBOR transition team, who will be in charge of the decision-making and control of the transition activites. This group can include a C-level executive, general counsel, IT team, and accounting team.
Put together a transition strategy that will encompass all activity across all affected areas. Outline the specific approaches towards mitigating risks, minimizing costs, and avoiding delays. Identify the alternative risk-free rates that will replace LIBOR.
Mobilize your contract management resources and automate redundant and simple manual tasks. Employ document automation and CLM software to minimize friction during the transition and streamline contract processes going forward.
Put together model fallback language that you will use across all of your contracts, both the ones that mature after 2021, and the new contracts you’ll draft under SOFR rate or any other benchmark rate that applies.
Establish a clause library for your contracts to speed up contract update processes. This is best done inside the CLM to simplify search and replacement, and avoid errors.
Develop a playbook to keep your business units and counterparties updated and guide them through the transition without problems or bottlenecks.
Update all your contracts without rushing.
Beat the deadline
How AXDRAFT makes Libor transition easier?
Enjoy a ridiculously painless LIBOR transition with AXDRAFT