On Jul. 22, EU LMA issued call to action in view of Sep. 2024 deadline.
EU LMA published call to action to loan market participants who are still in the process of USD LIBOR transition, as well as those who may not be prepared for impending deadline (end Sep. 2024) for cessation of the remaining synthetic USD LIBOR settings.
This is in light of concern relating to final stages of transition in loan markets which has been flagged by members, specifically in relation to developing market countries.
Background
In Nov. 2022, EU LMA raised initial concerns with the Official Sector relating to the relatively slow transition of US dollar loan facilities in developing markets.
Flagged significance of USD to loan market and, in particular, widespread and diverse international mix of those markets with legacy exposure to USD LIBOR loan facilities.
Wide scope, range, relative importance of USD LIBOR loan transactions remains particularly relevant for developing markets where non-local currency facilities to support trade, development, financing in general are almost invariably USD facilities.
Challenges continue to be posed by diverse and varied universe of loan counterparties (both borrowers and lenders) covering full spectrum and sophistication of institutions.
In addition, the involvement of sovereign or quasi-sovereign entities, regional development banks and other third parties where it can take time to get approvals.
Whilst most have been transitioned, there are still a small number of transactions using synthetic USD LIBOR which need to be transitioned before end Sep. 2024.
Also concern of undue reliance on cost of funds as fallback which can be problematic for lenders and borrowers as it may not be a workable permanent fallback.
The work of the Official Sector in raising awareness by sharing the letter more generally to reach a broader international audience had a positive effect.
One last call to action to spread the message more broadly is extremely helpful.
Call to Action
If haven’t yet completed USD LIBOR transition activities, action should be taken now to be fully prepared ahead of cessation of the remaining synthetic USD LIBOR settings.
Appeals to ensure all counterparties are ready and pass this message on to others.
All those with an interest in the efficient functioning of the loan markets have a shared responsibility to ensure maximum preparedness for the forthcoming deadline.
