Highlights from Global Capital

The US dollar market is lagging behind the sterling market in adopting LIBOR replacement, according to Fitch. However, with the Alternative Reference Rates Committee (ARRC) leading the initiative, more US market participants are looking at applying the committee’s guidelines to ensure a successful transition to a new benchmark rate. The intense focus on the issue could be felt throughout ABS East in Miami Beach last week, where attendees devoted much of their time discussing LIBOR fallback language and alternative benchmark rates. Four panels were exclusively dedicated to LIBOR, while the topic was brought up in almost every other session throughout the three day conference. Out of the many challenges, the most diff icult may be modifying older documents to have standardised fallback language, market participants agreed. Fitch added that progress over the next six months “may be critical” to leave time for transitions in legacy contracts to take place before the end of 2021. “You can probably separate the LIBOR transition issue into two separate areas,” said Francisco Paez, head of structured finance credit research at MetLife. “Part one is what do we do now going forward with new transactions coming online. Part two is how do we deal with transactions that were issued before the standard fallback language was developed. This is the legacy contract issue that people feel is more challenging because there isn’t one simple solution to deal with disparate transaction language that did not contemplate a permanent unavailability of LIBOR.”