New Analysis Estimates Up to 100 Million Contracts Require Assessment, Remediation as LIBOR Benchmark Rates are Discontinued
Factor Partners with Magic Circle Firm Allen & Overy to Offer Comprehensive LIBOR Solution
- Factor announces comprehensive LIBOR contract remediation solution and partners with Allen & Overy to help clients meet the massive LIBOR transition challenge
- In the midst of industry-wide disruption caused by COVID-19, replacement of LIBOR and other benchmarks represents the most complex re-contracting challenge the financial services industry has ever faced
LONDON, April 28, 2020 /PRNewswire/ -- New analysis from Factor estimates that 2 in 5 of the 100 million contracts using the London Interbank Offered Rate (LIBOR) have no language dealing with cessation of the benchmark, and will require remediation prior to it being discontinued at the end of 2021.
More than an estimated 100 million contracts reference LIBOR, representing more than $400 trillion in notional value, according to the Bank of International Settlements. In its impact study, Factor's position analysis on a corpus of loans and bonds referencing LIBOR found that less than 60% had specific language dealing with the unavailability of the rate. Furthermore, half of those contracts that did feature such language would effectively default to a fixed rate, impacting their commercial viability.
With this in mind, Factor today announced it has entered into a non-exclusive partnership with the global law firm Allen & Overy (A&O) to help the financial services industry manage the complexities of transitioning from LIBOR to new replacement rates. A&O has been at the forefront of advising financial institutions and other market participants on how to address this sizeable and time-sensitive issue, including the creation of IBORMatrix, a scaled solution to assist with the transition.
This massive task of assessing and remediating contracts at an unprecedented scale comes as the banking industry attempts to navigate the disruptions and additional burdens created by the global COVID-19 pandemic while continuing to provide the highest possible levels of service to its customers. Under these circumstances, the need to effectively address the transition from LIBOR is especially urgent for the industry. The comprehensive and time-saving solution enabled by the partnership combines A&O's best-in-class LIBOR-related legal advice with Factor's market-leading ability to apply that advice across thousands of contracts containing references to LIBOR.
Factor's tech-enabled capabilities integrate seamlessly with A&O's IBORMatrix tool, allowing Factor and A&O to provide a truly comprehensive solution across the entire spectrum of client requirements, from upfront legal strategy and advice to large-scale re-papering and remediation. The combination also allows for a wide range of review and remediation methods, making use of AI-enabled technology to automate review and drafting of contracts at scale while also allowing for personalised, "white-glove" handling of the most bespoke contracts for a bank's highest-value clients. The offering is modular, allowing clients to choose from a flexible menu of services.
Factor's offering builds on the success of its Brexit and other regulatory re-papering solutions, which the company has deployed on behalf of leading global banks, most recently to handle tens of thousands of contracts impacted by Brexit. Factor's capability integrates technology, market know-how and legal talent across the lifecycle of collection, review and renegotiation of LIBOR-impacted contracts at an unprecedented scale.
"With less than two years until the end of LIBOR, financial services firms are now actively gearing up large-scale initiatives to amend their contracts to move to new rates," said Chris DeConti, Head of Strategy at Factor. "The LIBOR transition impacts so many contracts and lines of business that the challenge is insurmountable with legacy models of working. The innovative partnership between Factor and A&O allows financial institutions to adapt to the transition more effectively, with minimal disruption and significantly reduced risk."
ABOUT FACTOR
Factor, formerly Axiom Managed Solutions, is the leader in next-generation solutions for complex legal work at scale, ranging from deadline-driven regulatory projects to long-term managed services. Factor combines the expert lawyers, market know-how and experience of traditional law with the process efficiency, smart legal technology and data-driven project management of New Law to bridge a huge gap in the market. The company is comprised of more than 500 lawyers, legal specialists, technologists, and process consultants with offices in New York, Chicago, London, Belfast and Poland. For more information, go to www.Factor.law or LinkedIn.
ABOUT A&O
Allen & Overy and A&O means Allen & Overy LLP and/or its affiliated undertakings. A&O is an international legal practice with approximately 5,500 people, including some 550 partners, working in more than 40 offices worldwide. A&O helps the world's leading businesses to grow, innovate and thrive. For almost a century, A&O has built a reputation for its commitment to think ahead and bring original solutions to its clients' most complex legal and commercial challenges. For more information go to www.allenovery.com.
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