LIBOR Replacement Clause
(Bilateral, Hardwired)


This LIBOR replacement clause is used in credit agreements to automate the adoption of a substitute benchmark interest rate upon the cessation of LIBOR. It takes the "hardwired" approach and is meant to be used in bilateral credit agreements. This clause includes practical guidance and drafting notes. The U.K.'s Financial Conduct Authority, the regulator overseeing the London Inter-Bank Offered Rate (LIBOR), has said that it would no longer require banks to provide LIBOR estimates at the end of 2021. This means that LIBOR may cease to be a viable benchmark for loan transactions at that time. This LIBOR replacement clause should be used to allow for a switch to an alternate interest rate (the front-runner for that distinction being the Secured Overnight Financing Rate (SOFR)). This clause specifies what happens once the lender is no longer able to ascertain LIBOR. This clause follows the so-called hardwired approach, which uses priority waterfalls, ranking the top choices of what rate ...