Loan contracts built upon the London interbank offered rate (LIBOR) must switch to a new benchmark interest rate within the next year. A March 2022 law dictates that if these agreements do not specify a fallback process for moving away from LIBOR, and they are not amended before the end of June 2023 to incorporate a new benchmark, they will automatically transition to a benchmark selected by the Federal Reserve Board of Governors—the secured overnight financing rate (SOFR).

Last week, Treasury & Risk published the first half of a conversation with Amy McDaniel Williams, a partner in the structured finance and securitization practice at law firm Hunton Andrews Kurth LLP who helps clients draft purchase agreements, bilateral credit agreements, and securitization contracts. She explained that new loans are now incorporating SOFR or other alternatives to LIBOR, but that many companies and lenders are trying to sort out what will happen to legacy loans and credit agreements that refer to the old reference rate.