Interest-rate options at Truist
|Index||Terms (tenors)||Interest rate structure|
|Term SOFR||1, 3, 6, and 12 month||Set in advance at commencement of the interest period|
|Average SOFR||30, 90, and 180 day||Set in advance at commencement of the interest period|
|Daily SOFR||Overnight||Averaged daily throughout the month|
|BSBY||Overnight and 1, 3, 6, and 12 month||Overnight BSBY fluctuates daily based on the rate that day; for other tenors, rates remain the same over the interest|
For more information about each of these rates and the version process, check out Moving on from LIBOR on the Truist Resource Center.
As the post-LIBOR era continues to take shape, we’re seeing the same complexity of different lenders preferring different indices that we witnessed decades ago before the market settled on 1-month LIBOR as the preeminent benchmark. The process will likely be the same for SOFR—we just need time for the market to settle around the most compelling benchmark. While 1-month Term SOFR seems to be the leading alternative, it’s still too early to tell.
What happens to my loans?
There are different scenarios depending on when your loans originated or will renew. If you have a swap or hedge in place, the benchmark shift will affect your swap as well.
The ARRC governs the LIBOR conversion, and the International Swaps and Derivatives Association (ISDA) regulates swap and hedging transactions. As the June 30, 2023 regulatory deadline approaches, Truist is working with its clients to devise the easiest and most transparent method to convert to the new benchmark for existing and new loans/swaps, regardless of maturity.
The LIBOR sunset and SOFR/BSBY arrival present a good opportunity for a strategic capital review. Mapping the conversion to the new reference rates, reviewing existing loans, considering new debt, and thinking about the impact of a rising rate environment makes now the ideal time to engage your Truist Dealer Services relationship manager. Look to hear from us in the coming months as we move your credit facilities the latest rate benchmarks.