LTi Technology Solutions will now provide support for the LIBOR to SOFR transition in all versions of its flagship product, ASPIRE V5. While the official end of LIBOR is still several months away, LTi is taking this action now with the goal of ensuring efficient replacement.

Users can enter SOFR compounded average or SOFR index rates and respective effective dates, provided by the Federal Reserve Bank of New York, into ASPIRE’s variable rate benchmark functionality to automatically modify contract payment and earnings schedules. This will allow ASPIRE users to recognize the impact of benchmark rate changes at whatever frequency is required by an agreement.

ASPIRE’s rate change functionality also allows for the implementation of the spread adjustment methodology recommended by the Federal Reserve Bank of New York Alternative Reference Rates Committee (ARRC) by allowing for a spread and benchmark change at a specified effective date by contract.

Looking to the future, LTi is monitoring the development of an IOSCO-compliant forward-looking term rate. Per ARRC’s paced transition plan, a goal has been set to establish an administrator of forward-looking term SOFR, with the initial rate published by the end of the first half of 2021.

This forward-looking term rate would remove the operational risks of not knowing the prevailing rate for a contract until the rate period is effectively over while taking advantage of the fundamentals of SOFR as a risk-free rate. Users of ASPIRE would still leverage ASPIRE’s variable rate functionality without the need to back-date the effective date of the rate change.

“The transition from LIBOR as a benchmark for variable rate transactions to SOFR is a critical need for many asset finance companies,” Peter Haug, product manager of LTi, said. “LTI is committed to facilitating a smooth transition for our users and their impacted partners by guiding our users in use of ASPIRE’s extensive variable rate functionality and our deep understanding of regulatory guidance.”