Navient LIBOR Transition
Outstanding U.S. Dollar LIBOR indexed Navient-issued Instruments Planned to Transition to SOFR after June 30, 2023
On March 5, 2021, the UK Financial Conduct Authority (the FCA) announced that all U.S. Dollar (USD) LIBOR settings will either cease publication or no longer be representative as a benchmark rate after June 30, 2023 (the “Cessation Date”).
Navient and certain of its affiliates/subsidiaries have issued private education loans and asset-backed securities (“ABS”) that are indexed to USD LIBOR (“Legacy LIBOR Contracts”). After the Cessation Date, for Legacy LIBOR Contracts which (i) do not identify a specific benchmark replacement that is based on any USD LIBOR value, or a determining person with the authority to determine a replacement benchmark interest rate for USD LIBOR, or (ii) identify a determining person with the authority to determine a replacement benchmark interest rate for USD LIBOR but such person has not determined a replacement benchmark interest rate and is not expected to do so prior to the Cessation Date (“Legacy LIBOR Contracts without Fallbacks”), the relevant USD LIBOR rate included in such contracts will be replaced with the applicable SOFR rate and tenor spread adjustment provided for in the Adjustable Interest Rate (LIBOR) Act of 2022 (the “LIBOR Act”) and the Federal Reserve Board’s final rule issued pursuant to the LIBOR Act (the “Final Rule”).
The following table lists the replacement benchmark interest rate (as specified in the Final Rule) for Legacy LIBOR Contracts without Fallbacks by each product specified below:
|Product||Replacement Benchmark Interest Rate|
|Private Education Loans||Corresponding tenor of CME Term SOFR¹ + applicable tenor spread adjustment (transition tenor spread adjustment during first year)²|
|ABS backed primarily by loans guaranteed under the Federal Family Education Loan Program (“FFELP ABS”)³||Corresponding tenor of Average SOFR⁴ + applicable tenor spread adjustment|
|ABS other than FFELP ABS³||Corresponding tenor of CME Term SOFR¹ + applicable tenor spread adjustment|
¹ For example, Legacy LIBOR contracts that currently reference a benchmark rate of One-Month USD LIBOR will convert to a new benchmark index with a tenor equivalent to one month, such as 1 Month CME Term SOFR after the Cessation Date. Legacy LIBOR contracts that currently reference a benchmark of Three-Month USD LIBOR will convert to a new benchmark index with a tenor equivalent to three months, such as 3 Month CME Term SOFR after the Cessation Date.
² All-in spread-adjusted rates will be published or provided by Refinitiv Limited as "USD IBOR Cash Fallbacks" for "Consumer" products.
³ Please refer to the corresponding notice sent to holders of applicable ABS for a list of the applicable ABS. For a list of ABS whose corresponding indenture identifies a replacement benchmark interest rate pursuant to the recommendations by the Alternative Reference Rates Committee of the Federal Reserve Bank of New York, please refer to the notice sent to holders of such ABS.
⁴ For example, Legacy LIBOR contracts that currently reference a benchmark rate of One-Month USD LIBOR will convert to a new benchmark index with a tenor equivalent to one month, such as 30-Day Average SOFR, after the Cessation Date. Legacy LIBOR contracts that currently reference a benchmark rate of Three-Month USD LIBOR will convert to a new benchmark index with a tenor equivalent to three months, such as 90-Day Average SOFR, after the Cessation Date.
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