SEC Provides Public Companies Guidance on Up Coming LIBOR Expiration
The SEC issued a statement reminding public companies that on March 5, 2021, LIBOR’s regulator, the Financial Conduct Authority, and administrator, ICE Benchmark Administration, Limited, announced that the publication of the one-week and two-month USD LIBOR maturities and non-USD LIBOR maturities will cease immediately after December 31, 2021, with the remaining USD LIBOR maturities ceasing immediately after June 30, 2023.
The statement said the SEC staff encourages companies to provide qualitative disclosures and, when material, quantitative disclosures, such as the notional value of contracts referencing LIBOR and extending past December 31, 2021 or June 30, 2023, as applicable, to provide context for the status of the company’s transition efforts and the related risks. For example, companies with material risk related to outstanding debt with inadequate LIBOR fallback provisions should consider disclosing how much debt will be outstanding after the relevant cessation date and the steps the company is taking address the situation, such as renegotiating contracts or refinancing the obligations. To the extent that a company has or is taking steps to identify and assess LIBOR exposure and mitigate material risks or potential impacts of the transition, the company should consider providing investors insight into what the company has done, what steps remain, and the timeline for further efforts.
According to the SEC, companies generally include disclosures about the LIBOR transition as part of risk factors, recent developments, MD&A and/or quantitative and qualitative disclosures about market risk. To the extent a company provides this disclosure in response to more than one disclosure requirement within a filing, the SEC encourages companies to consider providing a cross-reference or otherwise summarizing or tying the information together so an investor has a complete and clear view of the company’s plan for the discontinuation of LIBOR, the status of the company’s efforts, and the related risks and impacts. The SEC staff expects disclosures to evolve over time as companies provide updates to reflect transition efforts and the broader market and regulatory landscape.
Contact Steve Quinlivan for more information.