In September 2020, UK Finance published a guide for business customers to help them to understand the background surrounding the transition away from LIBOR, what to expect when LIBOR ceases to exist by the end of 2021 and the recommended steps for a smooth transition.
Businesses are encouraged to plan ahead to mitigate the impacts brought by the discontinuation of LIBOR. Some suggested action plans include:
|making an inventory for LIBOR exposures – e.g. check existing loan facilities and commercial contracts to see what rate(s) they reference;
|analysing and assessing affected products – e.g. action is required for LIBOR-referencing contracts that run beyond 2021;
|reviewing alternative rates and their pros and cons – e.g. SONIA and Bank Base Rate are examples of alternatives to LIBOR;
|considering other elements such as systems, accounting and tax matters; and
|discussing with lenders and finance providers the steps that may need to be taken to address LIBOR exposures.