The British Bankers Association, which oversees the compilation of the London Interbank Offered Rate (LIBOR), has recommended the discontinuation of a number of LIBOR calculations. Some discontinuations will eliminate all LIBOR calculations for particular currencies. The discontinuations for major currencies (which will take effect in May of this year) relate to less liquid LIBOR maturities (e.g., five- and seven-month LIBOR, but not six-month LIBOR). In all cases, however, the discontinuations raise the possibility that a loan or swap contract that uses one of the discontinued maturities could be adversely affected by the change.
The International Swaps and Derivatives Association, Inc. (ISDA) formed a working group to recommend a response to the discontinuations and has now published a Guidance Note describing the relevant issues. ISDA has also published a model amendment that can be used by market participants to modify relevant documents to substitute the use of an interpolated LIBOR for any discontinued LIBOR in a major currency. Market participants are under no obligation to follow the ISDA Guidance or use the ISDA amendment, but the existence of those two documents will, at a minimum, assist in orderly discussion of the discontinuation problem where it arises.
The ISDA documents can be found here.