Syndicated loans are trickier to transition to risk-free rates than certain other financial instruments. For the syndicated market to function efficiently using RFRs, calculation methodologies and market conventions will need to be standardised to a substantial degree. Pricing structures will require adjustment compared to LIBOR-based norms. The use of RFRs in place of LIBOR also gives rise to questions about the continuing relevance of certain long-established documentation terms.
To provide market participants with a focal point for evaluating these issues, the Loan Market Association has produced two draft term and revolving facilities agreements referencing RFRs: a sterling facility referencing SONIA and a dollar facility referencing SOFR (the Exposure Drafts).
This briefing highlights some of the key features of the Exposure Drafts of particular interest to borrowers.
Contacts
Stephen Powell (partner), Kathrine Meloni (special adviser)
