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NEW – LIBOR Floor Provisions: Market Trends 2020/2021

August 18, 2021

This practice note discusses LIBOR floor provisions, including current market trends in publicly filed credit agreements and commitment letters from the second half of 2020 and first half of 2021. Lenders tended to increase LIBOR floor percentages in 2020 during the height of COVID-19 in response to the dropping LIBOR benchmark rate. With a stabilizing market in 2021 and the end of LIBOR as a benchmark rate in sight, lenders have not focused on LIBOR floors in recent transactions and LIBOR floor rates have fallen back closer to the norm of 0% in the first half of 2021.

The following analysis is based on 123 publicly filed credit agreements that included a LIBOR floor from the second and third quarters of 2020 and 186 publicly filed credit agreements that included a LIBOR floor from the fourth quarter of 2020 and the first quarter of 2021. The data analyzed in this practice note was obtained using Market Standards, the searchable database from Practical Guidance of publicly filed credit agreements and commitment letters that enables users to search, compare, and analyze over 2300 credit agreements using approximately 90 detailed deal points and over 370 commitment letters using approximately 70 deal points to filter search results. For more information on Market Standards, click here.

For more information on recent trends concerning LIBOR floors, see Interest Rate Provisions in Credit AgreementsSOFR Loan Documentation: 8 Things for Borrowers to Think AboutThe Client Asks: What Happens When LIBOR Ends?, and LIBOR Replacement Resource Kit.

LIBOR Floor Provisions

Countries sometimes attempt to stimulate their economies by reducing benchmark interest rates, including LIBOR. Benchmark rates have at times been reduced to zero or even been negative. Due to the potential for benchmark rates to be reduced, lenders often include a benchmark floor in their credit agreements, which commonly was 0% prior to COVID-19.

During the height of COVID-19 in the second and third quarters of 2020, the U.S. Federal Reserve lowered benchmark rates to near zero. Many lenders began to counteract such decline in benchmark rates by increasing the LIBOR floor in their transactions to percentages greater than zero, typically in the range of 0.5% to 1.25%. Due to optimism that the economy is recovering and as the LIBOR cessation date is approaching at the end of 2021, banks have become less focused on increasing LIBOR floors. In the last quarter of 2020 and into 2021, the number of transactions with a LIBOR floor above 0% has steadily declined.

Out of 123 credit agreements surveyed from the second and third quarters of 2020 that included LIBOR floors, 64 deals (52%) included a LIBOR floor greater than 0%, and 59 deals (48%) included a 0% LIBOR floor.

Visualization of LIBOR Floors Q2 2020 and Q3 2020

Source: Market Standards, date range 4/1/2020 to 9/30/2020

Of those 64 deals with a LIBOR floor greater than 0%, 57 deals had a LIBOR floor between 0.1% and 1%. Seven deals had a LIBOR floor greater than 1% ranging from 1.5% to 2%.

Out of 186 credit agreements surveyed from the fourth quarter of 2020 and the first quarter of 2021 that included a LIBOR floor, 50 (27%) deals included a LIBOR floor greater than 0% ranging from 0.25% to 1%. The remaining 136 (73%) deals had a LIBOR floor of 0%.

Visualization of LIBOR Floors Q4 2020 and Q1 2021

Source: Market Standards, date range 10/1/2020 to 3/31/2021

Examples of Publicly Filed Credit Agreements in Lexis Market Standards

Camping World Holdings, Inc.

Agreement Date

June 3, 2021

Agreement

Credit Agreement

Company

CWGS Group, LLC

Administrative Agent

Goldman Sachs Bank USA

Facility Size/Type

$1.1 billion initial term loan commitment
$65 million initial revolving commitment

Industry

Retail—Auto Dealers and Gasoline Stations

Applicable Interest Rate Margin

  • Ranges from 2.25% to 2.50% for Eurocurrency loans depending on borrower's total net leverage ratio
  • Ranges from 1.25% to 1.50% for ABR loans depending on borrower's total net leverage ratio

LIBOR Floor

  • The LIBO Screen Rate will be deemed to be 0%, if such rate would otherwise be determined to be less than 0%
  • Solely with respect to the initial term loans, the LIBO Screen Rate will be deemed to be 0.75%, if such rate would otherwise be less than 0.75%

Stitch Fix, Inc.

Agreement Date

June 2, 2021

Agreement

Amended and Restated Credit Agreement

Company

Stitch Fix, Inc.

Administrative Agent

Silicon Valley Bank

Facility Size/Type

$100 million revolving commitment

Industry

Retail—Catalog and Mail-Order

Applicable Interest Rate Margin

  • 25% for Eurodollar loans
  • 1.25% for ABR loans

LIBOR Floor

Eurodollar base rate shall not be less than 0%

MSA Safety Inc.

Agreement Date

May 24, 2021

Agreement

Fourth Amended and Restated Credit Agreement

Company

MSA Safety Incorporated, et al.

Administrative Agent

PNC Bank, National Association

Facility Size/Type

$900 million revolving credit facility

Industry

Orthopedic, Prosthetic and Surgical Appliances, and Supplies

Applicable Interest Rate Margin

  • Ranges from 0.875% to 1.750% for LIBOR rate loans depending on borrower's net leverage ratio
  • Ranges from 0.000% to 0.750% for base rate loans depending on borrower's net leverage ratio

LIBOR Floor

Benchmark rate floor applicable to the LIBOR rate, if not otherwise specified, is 0%

Chipotle Mexican Grill, Inc.

Agreement Date

April 13, 2021

Agreement

Revolving Credit Agreement

Company

Chipotle Mexican Grill, Inc.

Administrative Agent

JPMorgan Chase Bank, N.A.

Facility Size/Type

$500 million revolving commitment

Industry

Retail—Eating Places

Applicable Interest Rate Margin

  • Ranges from 1.375% to 2.125% for Eurodollar loans depending on borrower's total leverage ratio
  • Ranges from 0.375% to 1.125% for ABR loans depending on borrower's total leverage ratio

LIBOR Floor

If the LIBO Screen Rate is less than 0%, then such rate shall be deemed to be 0% for purposes of the credit agreement

Petiq, LLC

Agreement Date

April 13, 2021

Agreement

Term Credit and Guaranty Agreement

Company

Petiq, LLC

Administrative Agent

Jefferies Finance LLC

Facility Size/Type

$500 million revolving commitment

Industry

Wholesale—Drugs, Drug Proprietaries, and Druggists' Sundries

Applicable Interest Rate Margin

  • 25% for Eurodollar rate loans
  • 3.25% for base rate loans

LIBOR Floor

Adjusted Eurodollar rate shall at no time be less than 0.50%

American Electric Power Company, Inc.

Agreement Date

March 31, 2021

Agreement

Credit Agreement

Company

American Electric Power Company, Inc.

Administrative Agent

Wells Fargo Bank, National Association

Facility Size/Type

$1 billion revolving commitment

Industry

Electric Services

Applicable Interest Rate Margin

  • Ranges from 1.000% to 1.750% for Eurodollar rate advances depending on borrower's credit rating level
  • Ranges from 0.000% to 0.750% for base rate advances depending on borrower's credit rating level

LIBOR Floor

If the Eurodollar rate is less than 0%, it shall be deemed to be 0% for purposes of the credit agreement

Community Healthcare Trust Inc.

Agreement Date

March 19, 2021

Agreement

Third Amended and Restated Credit Agreement

Company

Community Healthcare Trust Incorporated

Administrative Agent

Truist Bank

Facility Size/Type

$400 million revolving and term commitments

Industry

Real Estate Investment Trusts

Applicable Interest Rate Margin

Eurodollar Rate:

  • Ranges from 0.775% to 1.45% for revolving Eurodollar rate loans depending on borrower's credit ratings
  • Ranges from 1.15% to 1.70% for A-2 term Eurodollar rate loans depending on borrower's credit ratings
  • Ranges from 1.35% to 1.90% for A-3/A-4 term Eurodollar rate loans depending on borrower's credit ratings

Base Rate:

  • Ranges from 0.00% to 0.45% for revolving base rate loans depending on borrower's credit ratings
  • Ranges from 0.15% to 0.70% for A-2 term base rate loans depending on borrower's credit ratings
  • Ranges from 0.35% to 0.90% for A-3/A-4 term base rate loans depending on borrower's credit ratings

LIBOR Floor

If the LIBOR rate is less than 0%, such rate is deemed to be 0%

Brightsphere Investment Group Inc.

Agreement Date

February 23, 2021

Agreement

Amended and Restated Revolving Credit Agreement

Company

Acadian Asset Management LLC, as assignee of Brightsphere Investment Group Inc.

Administrative Agent

Citibank, N.A.

Facility Size/Type

$125 million revolving commitment

Industry

Investment Advice

Applicable Interest Rate Margin

  • Ranges from 1.50% to 2.00% for Eurodollar loans
  • Ranges from 0.50% to 1.00% for ABR loans

LIBOR Floor

If the LIBO Screen Rate is less than zero, such rate shall be deemed to be 0% for purposes of the credit agreement

PPG Industries, Inc.

Agreement Date

February 19, 2021

Agreement

Term Loan Credit Agreement

Company

PPG Industries, Inc.

Administrative Agent

PNB Paribas

Facility Size/Type

$2 billion term loan commitment

Industry

Paints, Varnishes, Lacquers, Enamels, and Allied Products

Applicable Interest Rate Margin

  • Ranges from 0.750% to 1.250% for Eurocurrency rate loans depending on borrower's credit ratings
  • Ranges from 0.000% to 0.250% for base rate loans depending on borrower's credit ratings

LIBOR Floor

If the LIBO rate is less than 0%, such rate shall be deemed to be 0% for purposes of the credit agreement

Credit Acceptance Corp.

Agreement Date

January 29, 2021

Agreement

Loan and Security Agreement

Company

Credit Acceptance Funding LLC 2021-1

Administrative Agent

Fifth Third Bank

Facility Size/Type

$100 million term commitment

Industry

Personal Credit Institutions

Applicable Interest Rate Margin

  • 0% for prime rate or Fed funds rate loans
  • N/A for benchmark rate loans calculated using the LIBOR rate

LIBOR Floor

In the event that the LIBOR rate is less than 0%, such rate shall be deemed to be 0% for purposes of the credit agreement

Express, LLC

Agreement Date

January 13, 2021

Agreement

Asset-Based Term Loan Agreement

Company

Express, LLC

Administrative Agent

Wells Fargo Bank, National Association

Facility Size/Type

$90 million term loan commitment
$50 million delayed draw term loan commitment

Industry

Retail—Apparel & Accessory Stores

Applicable Interest Rate Margin

  • Ranges from 7.00% to 8.25% for LIBO rate loans depending on borrower's level of EBITDA
  • Ranges from 6.00% to 7.25% for base rate loans depending on borrower's level of EBITDA

LIBOR Floor

If at any time the published LIBO rate is below 0%, then the LIBO rate determined for the credit agreement shall be deemed to be 0%

AssetMark Financial Holdings, Inc.

Agreement Date

December 30, 2020

Agreement

Credit Agreement

Company

AssetMark Financial Holdings, Inc.

Administrative Agent

Bank of Montreal

Facility Size/Type

$250 million revolving commitment

Industry

Investment Advice

Applicable Interest Rate Margin

  • Ranges from 2.000% to 3.625% for Eurodollar loans depending on borrower's total leverage ratio for the applicable pricing date
  • Ranges from 1.000% to 2.625% for base rate loans depending on borrower's total leverage ratio for the applicable pricing date

LIBOR Floor

If LIBOR as determined is less than 0%, LIBOR will be deemed to be 0% for purposes of the credit agreement

Matrix Service Company

Agreement Date

November 2, 2020

Agreement

Fifth Amended and Restated Credit Agreement

Company

Matrix Service Company

Administrative Agent

JPMorgan Chase Bank, N.A.

Facility Size/Type

$200 million revolving commitment

Industry

Construction—Special Trade Contractors

Applicable Interest Rate Margin

  • Ranges from 2.00% to 3.00% for Eurocurrency, EURIBOR, and CDOR loans depending on borrower's leverage ratio
  • Ranges from 1.00% to 2.00% for ABR loans depending on borrower's leverage ratio
  • Ranges from 2.50% to 3.50% for Canadian prime rate loans depending on borrower's leverage ratio

LIBOR Floor

If any screen rate (including the LIBO rate) is less than 0%, such rate shall be deemed to be 0% for purposes of the credit agreement

DoubleVerify Holdings, Inc.

Agreement Date

October 1, 2020

Agreement

Amendment and Restatement Agreement

Company

DoubleVerify Inc.

Administrative Agent

Capital One, N.A.

Facility Size/Type

$150 million revolving commitment

Industry

Services—Computer Programming

Applicable Interest Rate Margin

  • Ranges from 2.00% to 2.75% for Eurodollar loans depending on borrower's total net leverage ratio
  • Ranges from 1.00% to 1.75% for ABR loans depending on borrower's total net leverage ratio

LIBOR Floor

Eurodollar base rate shall not be deemed to be less than 0.75%

Purple Innovation, LLC

Agreement Date

September 3, 2020

Agreement

Credit Agreement

Company

Purple Innovation, LLC

Administrative Agent

KeyBank National Association

Facility Size/Type

$55 million revolving commitment
$45 million term loan commitment

Industry

Household Furniture

Applicable Interest Rate Margin

  • Ranges from 3.00% to 3.75% for Eurodollar rate loans depending on borrower's consolidated net leverage ratio
  • Ranges from 2.00% to 2.75% for base rate loans depending on borrower's consolidated net leverage ratio

LIBOR Floor

  • Adjusted Eurodollar rate is the greater of 0.50%, and LIBOR
  • If benchmark replacement for adjusted Eurodollar rate is less than 0.50%, then such rate will be deemed to be 0.50% for purposes of the credit agreement

Pyxus International, Inc.

Agreement Date

August 24, 2020

Agreement

Exit Term Loan Credit Agreement

Company

Pyxus Holdings, Inc.; Pyxus International, Inc.; Pyxus Parent, Inc.

Administrative Agent

Alter Domus (US) LLC

Facility Size/Type

$213.42 million term commitment

Industry

Wholesale—Farm Product

Applicable Interest Rate Margin

  • 00% for LIBO rate loans
  • 00% for prime rate loans
  • 0.50% for Fed funds rate loans

LIBOR Floor

In no event shall the LIBO rate be less than 1.5%

Doordash, Inc.

Agreement Date

August 7, 2020

Agreement

Amended and Restated Agreement

Company

Doordash, Inc.

Administrative Agent

JPMorgan Chase Bank, N.A.

Facility Size/Type

$300 million original revolving commitment
$100 million incremental revolving commitment

Industry

Services—Business Services, Not Elsewhere Classified

Applicable Interest Rate Margin

  • 00% for Eurodollar loans
  • 0.00% for ABR loans

LIBOR Floor

If the LIBO Screen Rate as determined is less than 0%, the Screen Rate shall for all purposes of the credit agreement be 0%

Waste Management, Inc.

Agreement Date

July 28, 2020

Agreement

Credit Agreement

Company

Waste Management, Inc.

Administrative Agent

Mizuho Bank, Ltd.

Facility Size/Type

$3 billion revolving commitment

Industry

Refuse Systems

Applicable Interest Rate Margin

  • Ranges from 1.00% to 1.30% for Eurocurrency rate loans depending on borrower's credit ratings
  • Ranges from 0.000% to 0.300% for base rate loans depending on borrower's credit ratings

LIBOR Floor

If the Eurocurrency rate is less than 0%, then such rate shall be deemed 0% for purposes of the credit agreement

Axogen, Inc.

Agreement Date

June 30, 2020

Agreement

Term Loan Agreement

Company

Axogen, Inc.

Administrative Agent

Argo SA LLC

Facility Size/Type

$75 million term loan commitment

Industry

Electromedical and Electrotherapeutic Apparatus

Applicable Interest Rate Margin

 7.5% for LIBOR rate loans

LIBOR Floor

LIBOR floor is 2.0%

Carnival Corporation

Agreement Date

June 30, 2020

Agreement

Term Loan Agreement

Company

Carnival Corporation
Carnival Finance LLC

Administrative Agent

JPMorgan Chase Bank, N.A.

Facility Size/Type

$1.86 billion term loan facility

Industry

Water Transportation

Applicable Interest Rate Margin

  • 50% for base rate loans
  • 50% for LIBOR rate loans
  • 7.50% for EURIBOR rate loans

LIBOR Floor

If the LIBO Screen Rate is less than 0%, then such rate shall be deemed to be 0% for purposes of the credit agreement

Examples of Publicly Filed Commitment Letters in Lexis Market Standards

Oasis Petroleum Inc.

Commitment Date

May 3, 2021

Agreement

Commitment Letter

Company

Oasis Petroleum Inc.

Administrative Agent

JPMorgan Chase Bank, N.A.

Facility Size/Type

$500 million bridge commitment

Industry

Crude Petroleum and Natural Gas

Applicable Interest Rate Margin

 6.50% increasing by 0.50% at the end of each three month period after closing for Eurodollar rate loans

LIBOR Floor

If the LIBO Screen Rate is less than 1.0%, such rate shall be deemed to be 1.0% for purposes of calculating such rate

Skyworks Solutions, Inc.

Commitment Date

April 22, 2021

Agreement

Project Mansfield US$2,500,000,000 Bridge Facility Commitment Letter

Company

Skyworks Solutions, Inc.

Administrative Agent

JPMorgan Chase Bank, N.A.

Facility Size/Type

$2.5 billion bridge facility commitment

Industry

Semiconductors and Related Devices

Applicable Interest Rate Margin

  • Ranges from 1.125% to 2.000% for LIBO rate loans depending on borrower's credit ratings
  • Ranges from 0.125% to 1.000% for base rate loans depending on borrower's credit ratings

LIBOR Floor

If the LIBO Screen Rate is less than 0%, such rate shall be deemed to be 0%

Synnex Corporation

Commitment Date

March 22, 2021

Agreement

Project Spire Bridge Commitment Letter

Company

Synnex Corporation

Administrative Agent

Citibank, N.A.; Citicorp USA, Inc.; Citicorp North America, Inc.; Citigroup Global Markets Inc.

Facility Size/Type

$1.5 billion senior unsecured term bridge facility commitment
$2.5 billion senior unsecured term bridge facility commitment
$3.5 billion senior unsecured revolving credit facility commitment

Industry

Wholesale—Computers, Peripherals, and Software

Applicable Interest Rate Margin

  • Ranges from 1.125% to 1.750% for LIBOR loans depending on borrower's credit ratings
  • Bridge unused fee ranges from 0.125% to 0.300% depending on borrower's credit ratings
  • For ABR loans, margin is 1.00% less than margin for LIBOR loans but in any event not less than 0%

LIBOR Floor

Adjusted LIBOR is the greater of 0% and LIBOR as determined

Perspecta Inc.

Commitment Date

 February 18, 2021

Agreement

 Project Jagman Amended and Restated Commitment Letter

Company

 Peraton Corp.; Peraton Inc.

Administrative Agent

 JPMorgan Chase Bank, N.A.; Alter Domus (US) LLC

Facility Size/Type

$3,775,000 senior secured incremental term loan facility commitment
$200 million incremental revolving commitment
$1,340,000 incremental senior secured second lien term loan facility commitment

Industry

 Services—Computer Processing and Data Preparation and Processing

Applicable Interest Rate Margin

  • For first lien incremental term facility, 4.25% for LIBOR loans and 3.25% for base rate loans with two 0.25% step downs depending on borrower's first lien leverage ratio
  • Margin for incremental revolving facility is the same as for the existing revolving facility
  • For second lien incremental term facility, 8.00% for LIBOR loans and 7.00% for base rate loans

LIBOR Floor

 LIBOR for purposes of calculating interest on any loan under the second lien term facility shall be deemed to be not less than 0.75%

Vielo Bio, Inc.

Commitment Date

 January 31, 2021

Agreement

 Project Venus Commitment Letter

Company

 Horizon Therapeutics USA Inc.

Administrative Agent

 Citibank, N.A.

Facility Size/Type

 $1.3 billion incremental term loan commitment

Industry

 Pharmaceutical Preparations

Applicable Interest Rate Margin

  • 25% for LIBO rate loans
  • 25% for alternate base rate loans
Rates step down 0.25% depending on borrower's total net leverage ratio

LIBOR Floor

 In no event shall the LIBO rate applicable to the term loan facility be less than 0.50%

Seacor Holdings Inc.

Commitment Date

 December 4, 2020

Agreement

 Project Safari Commitment Letter

Company

 Safari Parent, Inc.

Administrative Agent

 HPS Investment Partners, LLC
Ally Bank

Facility Size/Type

$395.60 million first lien term loan facility commitment
$169.40 million first lien delayed draw facility commitment
$100 million senior secured asset-based facility commitment

Industry

 Deep Sea Foreign Transportation of Freight Establishments

Applicable Interest Rate Margin

  • For term loan facility: 6.75% for LIBOR rate loans, and 5.75% for ABR loans, with two step down adjustments of 0.25% each depending on borrower's total net leverage ratio
  • For ABL loans:

○ Ranges from 2.00% to 2.50% for Eurodollar loans excluding supplemental amount and from 4.00% to 4.50% for supplemental amount, depending on average excess availability

○ Ranges from 1.00% to 1.50% for ABR loans excluding supplemental amount and from 3.00% to 3.50% for supplemental amount, depending on average excess availability

LIBOR Floor

 Adjusted LIBOR in no event shall be less than 1.0%

Tuesday Morning Corp.

Commitment Date

 November 2, 2020

Agreement

 Commitment Letter

Company

 Tuesday Morning, Inc.

Administrative Agent

 JPMorgan Chase Bank, N.A.

Facility Size/Type

 $110 million senior secured revolving credit facility commitment

Industry

 Retail—Variety Stores

Applicable Interest Rate Margin

  • For the first 12 months after closing, 2.75% for Eurodollar rate loans and 1.75% for CB floating rate loans
  • After the first 12 months, ranges from 2.25% to 2.75% for Eurodollar loans depending on excess availability
  • After the first 12 months, ranges from 1.25% to 1.75% for CB floating rate loans depending on excess availability

LIBOR Floor

 The adjusted LIBO rate shall have a floor of 0.50% at all times

Modivcare Inc.

Commitment Date

 September 28, 2020

Agreement

 Commitment Letter

Company

 The Providence Service Corporation

Administrative Agent

 Jefferies Finance LLC

Facility Size/Type

$30 million senior secured first lien revolving facility commitment
$600 million senior unsecured bridge loan facility commitment

Industry

 Transportation Services

Applicable Interest Rate Margin

  • For revolving credit loans, 4.00% for LIBOR loans and 3.00% for base rate loans
  • For bridge loans, 5.25% for LIBOR loans with increases of 0.50% each three-month period after closing

LIBOR Floor

Three-month LIBOR shall in no event be less than 1.0%

Roper Technologies, Inc.

Commitment Date

 August 12, 2020

Agreement

 Bridge Facility Commitment Letter

Company

 Roper Technologies, Inc.

Administrative Agent

 Bank of America, N.A.

Facility Size/Type

$4 billion 364-day senior unsecured bridge facility commitment
($2.5 million tranche A and $1.5 million tranche B)

Industry

 Industrial Instruments

Applicable Interest Rate Margin

  • Ranges from 1.00% to 1.75% for LIBOR loans depending on borrower's credit ratings
  • Ranges from 0.00% to 0.75% for alternate base rate loans depending on borrower's credit ratings

LIBOR Floor

If the LIBOR rate (or the base rate) is less than 0%, such rate shall be deemed 0% for purposes of the bridge facility

California Resources Corporation

Commitment Date

 July 15, 2020

Agreement

 Senior Secured Superpriority Debtor-In-Possession Revolving Credit Facility Commitment Letter

Company

 California Resources Corporation

Administrative Agent

 JPMorgan Chase Bank, N.A.

Facility Size/Type

$483,010,655.62 senior secured superpriority debtor-in-possession revolving credit facility commitment

Industry

 Crude Petroleum and Natural Gas

Applicable Interest Rate Margin

  • 50% for LIBOR loans
  • 3.50% for base rate loans

LIBOR Floor

1.00% LIBOR floor

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