A loan financing the purchase of a chicken processing company is set to be the first in the $1.2 trillion leveraged-loan market to use the Secured Overnight Financing Rate (SOFR) as a benchmark next year, as lenders prepare to ditch the scandal-plagued LIBOR rate.

Wayne Farms's $750 million loan, which will help fund Cargill Inc. and Continental Grain Co.'s planned acquisition of Sanderson Farms Inc., will initially use LIBOR as a benchmark this year, then automatically switch to SOFR in 2022, according to people familiar with the matter who aren't authorized to speak publicly.

Regulators had originally expected to phase out the London interbank offered rate (LIBOR) by the end of this year, but then extended that deadline for U.S. dollar LIBOR until mid-2023 for transactions that are sold by the end of this year. Starting next year, new loans can't be linked to LIBOR.

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