A U.S. government–sponsored agricultural lender is seeking to swap $1.9 billion of LIBOR-linked bonds in a deal backers say could serve as a template for future transactions ahead of the discredited reference rate's planned phase-out.

The Federal Farm Credit Banks Funding Corp. (FFCB) is looking to exchange securities due between 2022 and 2032 that lack language to account for the end of LIBOR, for notes that will shift to the Secured Overnight Financing Rate (SOFR) when the beleaguered LIBOR benchmark expires at the end of next year. There's at least $345 billion of dollar-denominated floating-rate notes set to mature after 2021 that don't have the necessary contractual terms to transition from LIBOR, according to TD Securities (USA), which is managing the deal.

The swap comes as proposed legislation designed to address the issue makes little headway with New York state lawmakers, raising concerns on Wall Street. The deal is being viewed as something of a trial balloon, as bankers, investors, and regulators work to avert financial chaos when LIBOR is phased out. Without a solution, countless floating-rate bonds would effectively convert to fixed-rate notes based on LIBOR's final print, potentially up-ending the market and leading to a flood of litigation, according to industry watchers.

Complete your profile to continue reading and get FREE access to Treasury & Risk, part of your ALM digital membership.

  • Critical Treasury & Risk information including in-depth analysis of treasury and finance best practices, case studies with corporate innovators, informative newsletters, educational webcasts and videos, and resources from industry leaders.
  • Exclusive discounts on ALM and Treasury & Risk events.
  • Access to other award-winning ALM websites including PropertyCasualty360.com and Law.com.
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.