ICE Benchmark Administration to Become New LIBOR Administrator
Financial Institutions Law Alert 01/31/14
On February 1, 2014, ICE Benchmark Administration (IBA) will officially take over as the new administrator of the London Interbank Offered Rate (LIBOR). IBA replaces the British Bankers’ Association (BBA) as administrator after revelations in 2012 of significant fraud and collusion connected to LIBOR rate submissions among member banks of the BBA. IBA has stated that, for the time being, it will continue to calculate LIBOR in the same manner as had BBA “to safeguard a smooth transition.”
Considerations for Loan
Many, if not most, loan documents define LIBOR as being administered by the BBA without any reference to a successor organization or the consequences in the event the BBA ceases to administer LIBOR. Absent unusual circumstances, courts are likely to interpret references to the BBA as including IBA as the successor administrator. However, loan parties may want to revisit existing loan documentation and consider whether to replace references to “British Bankers’ Association” with references to “ICE Benchmark Association (or any successor thereto if the ICE Benchmark Administration is no longer making a London Interbank Offered Rate available)” or similar language.
If you have any questions regarding these matters, please contact James Kaplan at (312) 715-6028 / [email protected], Corbin Morris at (312) 815-5066 / [email protected], or your Quarles & Brady attorney.