The end of LIBOR interest rates

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The London Interbank Offered Rate (LIBOR) has been a key variable interest rate benchmark for years. However, you may have heard that LIBOR would be going away as it saw a decline in its credibility over the last several years. Well, the time has come. Effective December 31, 2021, the international LIBOR interest rates as well as the 1-Week and 2-Month USD LIBOR tenors are no longer being used. Beginning June 30, 2023, the USD LIBOR tenor will cease to be used as well.

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If you currently have a variable interest loan that is based on the LIBOR interest rate, you should be reaching out to your lender to determine a new replacement rate and how it will impact you going forward. Certain agreements might contain language that includes a replacement rate. However, there may be some agreements that will need to be amended because the original agreement did not indicate a replacement rate. It would be beneficial to ask your lender about the various loan options available to ensure that your organization gets the best possible variable rate or potentially a fixed interest rate option as a replacement to the LIBOR rate.

Going forward in the US, LIBOR will be replaced with Secured Overnight Financing Rate (SOFR). SOFR is based on the financial institutions average overnight borrowing rate of cash collateralized by US Treasury bonds and is thought to be more reliable than LIBOR.

If you have any questions regarding the change from LIBOR interest rates, contact your Henry+Horne advisor.

Karen Lord