Publication | Law 360
How Debtor-in-Possession Loans Guide on LIBOR's Exit
A vital function of LIBOR during an economic crisis has been as a benchmark rate for debtor-in-possession (DIP) loans. The DIP loan rates that reference LIBOR and future replacement benchmarks influence whether companies will survive and accelerate economic recovery or continue to struggle.
Jeffrey Armstrong presents an analysis of interest rates on hundreds of DIP loan facilities. He demonstrates the importance of pricing risk in DIP loan rates, which has implications for whether a rate like SOFR or Ameribor is more suitable for high-risk loan benchmarks once LIBOR ends in 2023.