US investment groups Jeffreys and Antares Capital began selling Libor-related $ 395 million loans to investors on Thursday, highlighting the challenge of pulling the financial industry away from the dying interest rate benchmark.
Libor, or London interbank transaction interest rates, A solid step towards fading out At the end of last year, bank regulators mandated that new contracts related to contaminated benchmarks could not be created in 2022.
However, this rule applies only to institutions supervised by US bank regulators: the Federal Reserve System, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation.
Neither Jeffreys nor Antares are overseen by these regulators and can continue to print Libor loans.
This move reveals a rule gap and Challenge to outlaw Libor This is the last one.
And that’s not the only part of the loan market that may continue to be issued. Direct loans made between a company and a lender or a small group of lenders may still be Libor loans created by financial institutions other than banks.
Libor transactions made by banks in 2021, which are not yet on the market, could also be streamlined earlier this year, within the rules set by bank regulators. Credit Suisse leads a group of arrangers who sell $ 180 million in loans to Tricor Braun, a package design group affiliated with Libor. It is also one of the groups involved in the Addison Group’s $ 525 million Libor loan.
“We are in this gray period. Jeff Bakara, Group Head of Leveraged Credits at Boya Investment Management, said: The market is completely Sofr, So, he added, “it’s going to be a little sloppy” until we move to a safe overnight funding rate. Widely advertised alternative To Libor.
Nonetheless, bankers and investors said Libor’s issuance is unlikely to last long, as it becomes less dependent on benchmarks.
Bank regulators Deadline for mid-2023 Libor has been completely removed from the old and new contracts and is intended to end the nearly decade-long attempt to extract Libor from the financial system.Traders from several major banks Illegal rate manipulation Almost 10 years ago it was in their favor.
Libor’s transactions are expected to decline, making it less attractive as a lending benchmark, even if it is still allowed to be used. Meredis Sophie, Co-Head of Public Policy for the Loan Syndicate and Trading Association, said:
The new loan, syndicated by Jefferies and Antares, is for PowerStop, a provider of automotive brake kits backed by Sterling Investment Partners. Sterling and Power Stop did not respond to the request for comment.
This transaction is the first issuer in the syndicated loan market where companies with high debt often raise cash. Powerstop intends to use the proceeds of the financing to refinance existing debt and pay dividends of $ 160 million to shareholders, people familiar with the transaction said.
The loan is sold to investors at an interest rate of Libor Plus 4.75 percentage points. This is compared to the weighted average yield of less than 4% of the widely monitored index performed by LSTA.
Jeffreys and Antares declined to comment.
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