LIBOR is going away beginning June 30, 2023. The transition from LIBOR to SOFR requires commercial real estate (CRE) borrowers and lenders to understand their new replacement index and the potential effects the LIBOR cessation may have on their loans or interest rate hedges. To prepare for the transition, borrowers should take inventory of their commercial borrowings and determine which loans, if any, have LIBOR-based interest rates. Additionally, proactive borrowers will benefit from conversations with their lender(s) about alternative benchmarks, timelines, and the best path forward.
Preparing for the LIBOR to SOFR transition sounds overwhelming, right? That’s why our team of experts created the SOFR Hotline. Thirty Capital Financial can provide risk analysis, confirm fallback language and trigger events, confirm spread adjustments, and act as a resource for your organization during the transition to SOFR.
Here are some of the benefits you can expect when you speak with our team of SOFR experts:
SOFR Hotline Benefit #1: Learn about the LIBOR to SOFR transition.
The first step for a smooth LIBOR to SOFR transition is to understand LIBOR and SOFR and what the transition means for your firm and its loans and/or hedges. Without background knowledge, the conversations with your lenders may be more cumbersome.
When you contact our SOFR Hotline, you’ll learn about the LIBOR to SOFR transition. Plus, our team will answer important questions such as:
- Why was SOFR selected as an alternative rate?
- Where are we in the transition?
- What “trigger event” will transition my loan?
- How will the LIBOR cessation impact your current and future commercial real estate economics?
SOFR Hotline Benefit #2: Review Your Fallback Language (if any) to Understand What Will Happen On The Transition Date.
One of the most challenging aspects of the LIBOR cessation is how to move forward without defined fallback language in existing LIBOR-based contracts that will mature after the phase-out occurs. Once LIBOR is phased out, loans will be tied to a different index, causing a potential significant economic impact. The new index may not be defined in those legacy loans. In other words, legacy loans will likely be subject to new terms at the discretion of the lender and our team will help you review your terms and understand your options on loans at the transition date.
SOFR Hotline Benefit #3: Modify or Establish New Hedges to Conform to the SOFR.
Amendments to hedged facilities may require special attention to the loans index matching the hedge index, the type of SOFR being used, and “trigger events” to the transition. An advisor, like Thirty Capital Financial, can provide you with tools and custom solutions for interest rate risk management by using strategies that consider your risk tolerance and the current market conditions. Whether it’s a lender requested amendment, applying spread adjustments, or extra fees being added, an experienced advisor can help you manage the interest rate risk associated with that debt, while minimizing costs, through consultations and strategic portfolio planning.
Why Partner With Thirty Capital Financial?
Thirty Capital Financial has helped clients navigate the LIBOR to SOFR transition throughout the past year. We can leverage our expertise to help you negotiate the best possible outcome for your organization. Thirty Capital Financial is familiar with current legislation, fallback options, alternative SOFR conventions, and spreads. Work with us to ensure your transition is accomplished in the most efficient and cost-effective manner.
Ready to get started? Contact our SOFR experts at sofr@thirtycaptialfinancial.com. Or, call us now at 1-877-297-9888.
