Despite the pandemic, efforts to achieve a smooth transition of the loan market away from LIBOR and onto alternative "risk-free" benchmark rates have not abated. Over the last four months, the position in both the UK and the US market has become much clearer, with the Working Group on Sterling Risk-Free Reference Rates (the "SWG") and the Alternative Reference Rates Committee (the "ARRC") publishing their respective final recommendations in terms of LIBOR transition. These recommendations have been approved by the Bank of England and the Financial Conduct Authority in the UK and by the Federal Reserve Board and the Federal Reserve Bank of New York in the US. Suggested drafting reflecting these recommendations has also been published by the Loan Market Association (the "LMA") for English law loan agreements and by the ARRC for US law loan agreements.

In this article, we will look at the key LIBOR transition milestones recommended by the SWG and the ARRC and explain the current LMA drafting options for ship finance lenders/agents and borrowers in respect of their existing or future US dollar loan agreements (or other relevant documentation). We will also answer some FAQs we have received from clients.

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