Hawkins Advisory: Guidance from Treasury Regarding USD LIBOR Phase-Out

The attached Hawkins Advisory discusses recently published Proposed Treasury Regulations that provide guidance as to the ability of parties to variable rate debt and other contracts that currently rely on LIBOR as an interest rate benchmark to alter the documents for these transactions for the purpose of incorporating interest rates reflective of other reference rates. The Advisory also reviews the status of other regulatory efforts to prepare the capital markets to transition from broad reliance upon LIBOR.

The Proposed Treasury Regulations generally provide that such changes will not be treated as “substantial” modifications of existing transactions that might otherwise result in a variety of federal tax consequences, including termination, if the new reference rate is a “qualified rate” and certain other requirements are met. This would create an exception from the current rules governing alterations.

This proposed exception may extend to changes to “fallback rates” and to “associated alterations” that are reasonably necessary to implement the underlying reference rate changes.

The Proposed Regulation comment period expires on Saturday November 23, 2019. Taxpayers may rely upon the Proposed Regulations for permitted changes that occur prior to the Final Regulation publication date, provided that the taxpayer and its related parties consistently apply the proposed regulations prior to such date.

Read the Advisory.



Copyright © 2024 Bond Case Briefs | bondcasebriefs.com