Japanese Securitizations: Time Ticking On LIBOR Transition

Japanese securitizations could find losing LIBOR laborious. The U.K.'s Financial Conduct Authority (FCA) officially announced on March 5, 2021, permanent cession of LIBOR publication at the end of 2021 for many currencies, including the Japanese yen. In view of the permanent discontinuation of the publication of the Japanese yen London Interbank Offered Rate (LIBOR), parties to securitization transactions are intensifying discussions on benchmark replacements. Certain securitizations we rate in Japan use LIBOR as a benchmark for setting reference rates. The fallback provisions for such transactions vary. In this report, S&P Global Ratings examines the potential impact of the loss of LIBOR on Japanese securitizations it rates. In Japan, about 12% of our rated tranches relate to securitizations that reference LIBOR

...- Japanese yen LIBOR announcements will be discontinued at the end of 2021; discussions on replacements among securitization transaction parties are accelerating in Japan. - Of the transactions we rate in Japan, 12% have Libor-based benchmarks; all have fallback provisions, which typically address a temporary unavailability of the benchmark, rather than permanent discontinuation, in our view. - We will assess the effects of replacement benchmarks on rated transactions as we learn about them. Japanese securitizations could find losing LIBOR laborious. The U.K.'s Financial Conduct Authority (FCA) officially announced on March 5, 2021, permanent cession of LIBOR publication at the end of 2021 for many currencies, including the Japanese yen. In view of the permanent discontinuation of the publication of the Japanese yen London Interbank Offered Rate (LIBOR), parties to securitization transactions are intensifying discussions on benchmark replacements. Certain securitizations we rate in Japan...

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