Global Financial Institutions Coverage

5 8 Product Type Post-LIBOR Result for Legacy Contracts Without Proposed Legislation Post-LIBOR Result for Legacy Contracts with Proposed Legislation FLOATING RATE NOTES Polling or, if not available, the last available LIBOR. Floating rates could be converted inadvertently to fixed rates due to LIBOR's discontinuation. Unanimous holder consent to amend fallback provisions referencing LIBOR. Automatic override of references to interbank polling and nullification of language referencing the last available LIBOR in favor of the ARRC-recommended fallback rate, which is closer to the originally agreed upon rate. SECURITIZATIONS Generally, reversion to a fixed rate based on last LIBOR. Amendment through noteholder vote, many of which require unanimous consent. The transition is complicated by the fact that many securitizations involve different tranches, and many other underlying instruments (securities, derivatives, etc.) in a securitization will not fall back to the last LIBOR, creating a high basis risk among the rates. Automatic override of any existing fallback language in favor of the legislation's recommended fallback rate, which would more closely match the indices on the underlying assets or loans, and minimizes basis risk. CONSUMER ADJUSTABLE RATE MORTGAGES (ARMS) Generally determined at the discretion of the lender. No standardized or defined replacement rate, though lenders are typically obligated to consider "comparable information." This could result in disparate outcomes and divergent rates. Allows lenders to receive a litigation safe harbor if they choose to opt in to the legislation's recommended fallback language for ARMs. DERIVATIVES Currently, the calculation agent is obligated to poll reference banks, which is expected to fail once LIBOR no longer exists. There is no further fallback, which could lead to litigation. ISDA's Protocol binds only adhering parties, and there is concern that end-users exempt from clearing requirements may opt out of adhering to the Protocol. Nullification of existing fallback references in favor of the legislation's recommended fallback rate, which will be consistent with the ISDA Protocol, and reduces uncertainty and operational risks among counterparties. BUSINESS LOANS (BILATERAL AND SYNDICATED) May require polling from one or more reference banks, but if no rate is obtained, typically falls back to a prime rate or a rate that is close to prime rate. More recent loans, particularly syndicated loans, allow parties to select and implement a replacement benchmark, and convert to an alternative base rate if no consent achieved. Does not affect the loans to the extent that the loans fall back to a non-LIBOR replacement, but will nullify any reference to bank polling, and override silent and ambiguous fallback provisions. PROCUREMENT AGREEMENTS Generally, no existing fallback and parties left to negotiate a mutually acceptable resolution or litigate matter. Suspension of deliveries and payments in the interim may disrupt the economy. Fallback to the legislation's recommended fallback rate. MUNICIPAL BONDS Maturity dates often extend well beyond 2021 and insufficient fallback language to address LIBOR discontinuation, creating potential rate uncertainty and litigation for taxpayers and municipalities. Fallback to the legislation's recommended fallback rate.

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