The IRS recently announced that it will be issuing guidance in the near future on the elimination of the London Interbank Offered Rate (LIBOR). The guidance, long-awaited by the municipal finance industry, is expected to address under what circumstances a reissuance will occur when a floating rate bond using LIBOR as the reference rate is modified to another reference rate.The guidance also will affect issuers that have entered into interest rate swaps based on LIBOR. To the extent that issuers have integrated such swaps with their related bonds, a change in the reference rate may result in the swap losing its status as a qualified hedge.
As reported by The Bond Buyer, Treasury representative John Cross made the announcement at the annual conference of the National Association of Bond Lawyers, held in Chicago earlier this month. Cross indicated that the guidance has been submitted to the Office of Management and Budget for final review and approval, and that it should be released sometime this fall.
Stay tuned to this blog for an overview of the guidance and its tax implications for floating rate bonds and swaps once it is released.