The Asia Pacific Loan Market Association (APLMA) has issued SOFR-based Discussion Documents and Guidance Note on 12 November 2020. This is a significant milestone in promoting discussions and accelerating the transition process in Asia.

There is no settled market approach or convention as yet given the nascent stage of development of the RFR loan markets. The APLMA has therefore presented two options and discussions drafts to the industry for consideration: (1) Daily Simple SOFR based US dollar term and revolving facilities agreement and (2) Compounded daily SOFR based US dollar term and revolving facilities agreement. These are discussion drafts to promote engagement on the issues and are not recommended nor standard form.

The Guidance Note discusses the basis for drafting and methodology as well as key concepts and issues to consider and where feedback is being sought.

Market participants should consider the issues highlighted in the discussion drafts on risk free rates (RFR) including relevant methodology and conventions. It is an opportunity to contribute to the development of the RFR loan markets in this region. The APLMA have requested for feedback before 4 December 2020. David Milligan, a partner in our banking group, is on the APLMA Loan Documentation Committee and will be happy to further discuss any issues.

Members of the APLMA can access the SOFR-based Discussion Documents and Guidance Notes on the APLMA website.