Transactions in the collateralized loan obligation (“CLO”) market have generally included some form of LIBOR replacement provisions for over a year, stemming from the announcement in July 2017 by Andrew Bailey, the head of the UK Financial Conduct Authority (“FCA”), that the FCA intended to phase out LIBOR in its present form by the end of 2021. The latest iteration blends a “hardwiring” approach with an “amendment” approach. In this Legal Update, we discuss this “Blended Approach”—how it updates the LIBOR replacement provisions otherwise prevailing in the CLO market, addresses value transfer and basis risk concerns and achieves two positive outcomes for the CLO market.

You can find the Legal Update here.