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Prepare for LIBOR transition

We outline five things all businesses need to do now to prepare for the end of Libor.

If your company has loans or derivatives referencing the London inter-bank offered rate (Libor), now is the time to take stock of your borrowing and prepare for its conclusion in 2021.

The use of Libor as a reference rate in loan agreements or derivatives will no longer be allowed from 2021.

Over the next year, banks must contact businesses with loans that charge interest based on Libor to agree what their new rate will be.

“Companies need to look carefully at their loans, derivatives and upcoming financing needs,” advises Steve Farrell, a partner at Deloitte. “The way Libor-linked interest rates have been calculated previously may no longer apply and your financing charges may well vary as a result. Therefore, be prepared when you’re talking to your bank.”

This is an extract from the Business & Management Magazine, Issue 277, September 2019.

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