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Even though LIBOR will still stay with us for a few more months, banks are requesting their clients to make a decision on how to transition their LIBOR loans and hedges before the end of September, citing “compliance” with the regulator.
We have seen some concerning proposals being offered to our clients; some of which are noticeably different even when from the same bank. Negotiating different SONIA conventions between loans and hedges and reviewing how they are computed, assessing the inclusion of SONIA 0% floors in loans and at what price, and understanding how the Credit Spread Adjustments are calculated can all be an intensive process. There are also the potential impacts on the accounting for both loans and hedges, particularly if hedge accounting is being applied. All this cannot be done by accountants or solicitors alone, loan and hedging markets and commercial expertise is necessary.
It may very well be the case that some of the above issues are unresolved or maybe your lender/swap counterparty has not yet provided you with the necessary information or alternatives in a clear and understandable manner.
You do NOT have to accept whatever your lender throws at you and this remains true even if you are confronted by their internal deadlines. Even if a lender does not offer many alternatives and/or your LIBOR Transition seems pretty straightforward, it’s best when you understand all of the ramifications of your accepted or chosen alternative. It is important to understand if there is anything left on the table that can still be negotiated and what can be expected in the next few months until LIBOR is no more (please click here to read our ‘LIBOR No More’ article)!
Join us for a Webinar, at 11am on 21st September, where we will share our experience so far in the LIBOR Transition journey. To register, please contact michelle@vedantahedging.com.
