LIBOR is widely expected to become irrelevant after December 31, 2021, and there are trillions of dollars of LIBOR-based financial instruments, including loans and derivatives that create potentially material exposures that need to be addressed. Borrowers, banks and alternative lenders all face the daunting task of systematically reviewing each and every loan and financial instrument in their portfolio to determine the appropriate course of action. With a large number of U.S. credit agreements stipulating a fallback to Base Rate (i.e., Prime), borrowers will face a 200 to 300 basis point shock increase in interest costs until legal agreements are amended – not a seamless process.
A recent CFO Dive report urges companies not to wait on devising LIBOR transition plans. “The risk of complacency is high, and it’s going to get higher,” Tom Wipf, vice chairman of institutional securities at Morgan Stanley and chair of the Alternative Reference Rates Committee (ARRC), told CFO Dive. “Delays could mean your firm could be crowded out when it needs to have LIBOR conversations with clients and counterparties.”
“We have already worked with many of our clients to help them check their contract fallback provisions and limit LIBOR exposure. But there is a lot more that goes into the transition, so this partnership with a holistic team of financial, technological and legal experts will make the transition even smoother for clients,” said Helen Kane, founder and CEO at Hedge Trackers.
LiborXchange takes a holistic approach to guide clients through the transition. To ensure an efficient and transparent transition, LiborXchange leverages:
- Deep experience in global capital markets
- A first-class data extraction, document automation and workflow solution
- Quantitative analysis
- Risk management support
- Legal resources, if needed
According to Joyce Frost, Co-Founder and Partner at Riverside, “to successfully sail through the transition, there is an enormous amount of heavy lifting to be done. Partnering with a team that brings the right combination of financial, technological, and legal expertise to the table is key to achieving success.”
According to Mathias Strasser, CEO of Scissero, “the successful implementation of large-scale regulatory projects, such as the LIBOR transition, increasingly requires technology experts, lawyers and capital markets specialists to seamlessly work side-by-side. We are excited to partner with Riverside and Hedge Trackers, who share our vision for a multi-disciplinary approach to offer clients a one-stop-shop solution.”
To learn more and see LiborXchange in action, visit liborxchange.com.
About Hedge Trackers LLC
Based in Silicon Valley, Hedge Trackers is the premier provider of consulting, outsourced derivative accounting, supporting technology and training services for firms that need to plan, execute or maintain a foreign currency, interest rate or commodity hedging program.
A document automation specialist based in London and New York with deep experience in data extraction and integrated legal and paralegal support services. Scissero forms part of the WallStreetDocs group, which was formed in 2009 and provides document-centric automation solutions for the world’s largest investment banks.
About Riverside Risk Advisors
An independent derivatives advisory firm located in New York City often referred to as “Best-in-Class”. Riverside advises clients on hedging interest rate, currency, convertible bond, and commodity market risk. Formed in 2009, its clients include private equity, project finance and infrastructure, real estate, corporate, insurance and financial entities operating in the U.S., Canada, Latin America, Europe, Africa, and Asia.