CARR has developed comprehensive and unambiguous language to assist parties in preparing for the termination of the CDOR. While voluntary, CARR strongly recommends that parties adopt the recommended language and ensure that they protect themselves against challenges that may arise later in the future from insufficient fallback language. It is also important to note that these are general CARR recommendations and that borrowers and lenders should identify and incorporate their own language based on their particular circumstances and needs. Terms for recommended languages are only recommendations and may be voluntarily included in the loan documentation that currently refers to CDOR. The parties may modify the conditions to reflect their needs and preferences, and market participants are not bound by these recommendations. There may also be changes to the recommended language as the market develops, and it is important that interested parties monitor any updates in case the language is adopted. Nevertheless, the abolition of the London Interbank Offered Rate (LIBOR) has highlighted the various legal, economic and practical problems that can arise when fallback language is ambiguous or non-existent. Adopting the recommended language is one way to ensure that a loan agreement contains strong fallback language, saving time, money, and legal resources in the future. With the reconstitution of the ARRC in 2018, a wider range of market players were added as members of the ARRC and its working groups. Since then, ARRC has been working to provide recommendations for risk management in contract wording for cash products if LIBOR is no longer usable. As part of this effort, ARRC has published consultations on public comments on the wording of relief contracts for several cash commodities.
These consultations outline the proposed language to be voluntarily included in new USD LIBOR contracts to ensure that these contracts are effective even if LIBOR is no longer usable. These sample phrases are automatically selected from various online information sources to reflect the current use of the word “fallback”. The views expressed in the examples do not represent the views of Merriam-Webster or its editors. Send us your feedback. Following a full review of public comments at the end of the comment period, ARRC will publish final fallback language recommendations to be included in new USD-LIBOR contracts for voluntary use by market participants. Final consultations, comments and recommendations are broken down by cash product, where applicable. For more information or advice regarding CDOR fallback language or the transition from CDOR to CORRA, please contact Ryan Therrien or Jonathan Meyer. To encourage market participants to migrate their credit facility documentation to CORA, CARR published in August 2022 a recommended fallback language (the recommended language) for use in new and existing loan agreements.
The use of the recommended wording will ensure that credit agreements include a robust benchmark interest rate after the future discontinuation of the CDOR by RBSL by ensuring an automatic and wired transition to CORA. The recommended language includes a suggested wired fallback language that can be inserted into loan agreements and modified depending on the context. Below is a high-level overview of some of the main features of the recommended language. Capitalized terms described below, which are not defined herein, are defined in the recommended language. Please note that the information provided in this article does not constitute legal, professional or legal advice of any kind. If you require assistance with specific legal issues in connection with the transition from CDOR to CORRA or in banking and finance law generally, please contact a member of Dentons` Banking and Finance Group or other legal counsel. ARRC LIBOR fallback language summary (published November 15, 2019) ARRC members have also actively participated in the work of the International Swaps and Derivatives Association (ISDA) to examine best practices for the robustness of derivatives contracts. ISDA has outlined a proposed process to make these contracts resistant to the possible permanent termination of LIBOR or other significant interbank interest rates, and is now focusing on the specific details of implementing this process.
16. In May 2022, Refinitiv Benchmark Services Limited (RBSL), the benchmark administrator of the Canadian dollar offered rate (CDOR), announced that the calculation and publication of all CDOR maturities will be permanently discontinued after June 28, 2024 (CDOR exit date). This announcement follows an important public comment period led by the Canadian Working Group on Replacement Reference Rates (CARR), which culminated in the release of the CRRA white paper on December 16, 2021.