Subscription credit facilities have become a normal part of fundraising and management. With the end of the London Interbank Offered Rate (LIBOR) approaching, however, a new element has been interjected into amending, renewing and entering into credit agreements in the PE space. Although existing U.S. Dollar (USD) LIBOR loans can rely on LIBOR quotes for some time, lenders may not issue new LIBOR-based loans for any currency, including USD, after 2021. Most lenders will use a new, non-LIBOR benchmark for any loans issued between now and the last day of the year. In this first article in a two-part series, the Private Equity Law Report spoke to three lender-side counsel and four borrower-side counsel about what the end-of-year deadline means and the state of readiness in the PE subscription facility space. The second article
will explore terms in LIBOR remediation provisions in which borrowers are pushing back against lender language, as well as provide information about the typical legal costs and overall timing associated with LIBOR transition efforts. See our two-part series on Institutional Limited Partners Association guidance on subscription credit facilities: “Reiterating the Need for Increased Disclosures on the Use of Facilities and LP Obligations
” (Aug. 25, 2020); and “Sponsor Skepticism Over the Value and Potential Harms of Excessive Disclosures to LPs About Facilities
” (Sep. 1, 2020).