2020

COVID-19 has driven anxiety over the LIBOR transition right off almost everyone’s top-of-mind list and yet the crisis is taking no notice of that lack of regard and soldiering on.  The ARRC continues to beaver away, generating guidance and advice and otherwise proselytizing the need to get on with it and be ready for transition on January 1, 2022.

But are the markets listening?  Look at our ardor!  Except for special situations, the use of SOFR, to date, has been a political and not an economic decision for those who have elected to use it.  There is little take-up in the real world and little enthusiasm for doing so.  And what’s with the huge whoops a few weeks ago when SOFR’s March to the Sea was interrupted when the Fed backed off using SOFR in the Fed’s new $6 billion aid program for small and mid-size businesses?  Run away! Run away!  Back to LIBOR!Continue Reading LIBOR: The Monty Python Parrot of Finance

Last week the New York Supreme Court answered an SOS from a borrower seeking a TRO to prevent a sale under the UCC in NYC that was scheduled to take place on May 1st.  For more information on this alphabet soup, read our OnPoint about new potential pitfalls for mezzanine lenders seeking to…

My last commentary, Playing with Broken Toys in Coronavirus Land, touched on the notion that sometimes following rules can guarantee a bad outcome.  I’ll leave more important musings about ethics and morality aside here (I still don’t have a clue about what Kant was nattering on about) and focus on the more mundane question of whether one should do what a contract says when the contract conflicts with the exercise of good judgment.
Continue Reading “I Was Just Following Orders”

I’ve been offline for a bit.  An amalgam of writer’s block caused by the enormity of the Coronavirus mess – what can be said that’s useful – and the consequence of being wildly busy as everyone across financial markets tries to pivot to the new reality.  Unburdened by any knowledge of science, medicine or epidemiology, I have been marinating in the output of such intellectually distinguished journals as The Sun, The Daily Beast, The Onion, The Mirror, The New York Post and Drudge on the daily ups and downs of our plague, its cost in blood and treasure and the disruption it has caused across all aspects of our life.  Consequently, I have opinions but I’ve concluded they’re pretty damn worthless.  We’re in uncharted waters, akin to those bits on a medieval map where the cartographers had no clue and wrote: “Here be Dragons.”
Continue Reading Playing with Broken Toys in Coronavirus Land

As part of Dechert’s COVID-19 Coronavirus Business Impact Broadcast Series, the Crunched Credit team has released its first-ever podcast: Beds Without Heads: Hotels in the Era of the Coronavirus. In this episode, Dechert global finance lawyers Krystyna Blakeslee, Jessica Bula and Haleh Rabizadeh expand on their recent Crunched Credit blog and discuss the impact…

The LIBOR transition plods onward.  Last Wednesday, the Alternative Reference Rates Committee (ARRC) announced its recommended spread adjustment methodology for cash products referencing LIBOR.  Regulators around the world have been clear: interim LIBOR replacement deadlines might slip, but LIBOR’s days are still numbered.  At the end of March, which feels like ten thousand years ago, the Financial Conduct Authority said that “[t]he central assumption that firms cannot rely on LIBOR being published after the end of 2021 has not changed and end-2021 should remain the target date for all firms to meet.”  Amid the constant upheaval as a result of the coronavirus pandemic, isn’t it nice to know that some things aren’t changing?
Continue Reading ARRC Recommended Spread Adjustment Announced

Here is something helpful that has surfaced amidst the fallout, pain and confusion of the global COVID-19 crisis.  The implementation date for the all-too-simple in theory but not-simple-at-all in practice CECL accounting standard has been pushed back by the passage of the CARES Act for banks until the COVID-19 national emergency declared by the president ends or December 31, 2020, whichever is earlier.  In addition, an interim final rule released by the FRB, OCC and FDIC on Friday, March 27th, now provides an option to delay the effects of CECL on regulatory capital for two years (in addition to the original three-year transition period for banks required to adopt CECL during their 2020 fiscal year).  Banks opting to use both forms of relief would be subject to a modified transition period which would be reduced by the amount of quarters CECL was delayed due to the CARES Act.  No relief was provided for non-banks who are otherwise required to follow CECL.
Continue Reading CECL: The Ugly Pig Running Out of Lipstick

The spread of COVID-19 has created a new reality for the hospitality industry. As of March 25, the CDC reported 54,453 confirmed cases in the U.S., and the number is expected to grow exponentially. In the hopes of slashing infection rates, governments have implemented international travel bans, shelter-in-place orders and other restrictive measures. The second-most popular tourist destination in the world, Spain, has ordered all its hotels and other tourist accommodations to be closed.
Continue Reading Beds without Heads: Hotels in the Era of the Coronavirus