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.

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