LSTA shows exposure drafts of documentation revising Libor definition

By Sara Rosenberg

New York, June 22 - The LSTA published exposure drafts of its trading documentation that proposes to revise the definition of average Libor, according to a news release.

Under the draft, average Libor would now be calculated by taking the sum of all individual Libor rates for each day in the period from the date two business days before the commencement date to two business days before the delayed settlement date and dividing by the total number of days in the period.

In addition, the draft proposes changes to the calculation of delayed compensation for Libor loans that are subject to a Libor floor and the inclusion of "clawback" language for par trades.

The LSTA said that the existing par confirm does not address how delayed compensation should be calculated for Libor loans that are subject to a Libor floor. The proposed language makes clear that, for each day the calculation of interest for a Libor based loan is subject to a Libor floor, the delayed compensation for such loans should be calculated as it is for a non-Libor based loan.

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