For the Belarus, Russian Harmful Foreign Activities (Russia) Ukraine-/Russia-related, and Venezuela-related sanctions programs, how does OFAC view modifications to pre-existing loans, contracts, or other agreements to replace London Interbank Offered Rate (LIBOR) as the reference rate?
OFAC's answer
In July 2017, the United Kingdom Financial Conduct Authority (FCA) announced the "future cessation and loss of representativeness" of the ICE Benchmark Administration's 35 global reference rates, the LIBOR rates. In light of the discontinuation of LIBOR as a benchmark reference rate, OFAC is issuing additional guidance. The Belarus, Russia, Ukraine-/Russia-related, and Venezuela-related sanctions programs prohibit U.S. persons from dealing in certain new debt of persons identified as subject to these prohibitions. In FAQ 944 (Belarus), [FAQ 986 (Russia-related)](https://ofac.treasury.gov/faqs/986), [FAQ 371 (Ukraine-/Russia-related)](https://ofac.treasury.gov/faqs/371), and [FAQ 511 (Venezuela-related)](https://ofac.treasury.gov/faqs/511), OFAC provides examples of new debt, such as "bonds, loans, extensions of credit, loan guarantees, letters of credit, drafts, bankers acceptances, discount notes or bills, or commercial paper" issued on or after various specified dates. For more information on the effective dates and relevant debt maturities for each of these sanctions programs, please see FAQ 947 (Belarus), [FAQ 984 (Russia-related)](https://ofac.treasury.gov/faqs/984), [FAQ 370 (Ukraine-/Russia-related)](https://ofac.treasury.gov/faqs/370), and [FAQ 553 (Venezuela-related)](https://ofac.treasury.gov/faqs/553). For the Belarus, Russia, Ukraine-/Russia-related, and Venezuela-related sanctions programs, OFAC has indicated that certain changes to contractual terms of loans, contracts, or other agreements that were entered into prior to the effective date of the relevant sanctions prohibitions could convert pre-existing debt that was not subject to the sanctions prohibitions into new debt that is subject to the sanctions prohibitions. (See FAQ 947 (Belarus), FAQs [987](https://ofac.treasury.gov/faqs/987) and [989](https://ofac.treasury.gov/faqs/989) (Russia-related), [FAQ 394 (Ukraine-/Russia-related)](https://ofac.treasury.gov/faqs/394), and [FAQ 553 (Venezuela-related)](https://ofac.treasury.gov/faqs/553). Loans, contracts, or other agreements that use LIBOR as a reference rate that are modified to replace such benchmark reference rate will not be treated as new debt for OFAC sanctions purposes, so long as no other material terms of the loan, contract, or agreement are modified. Date Updated: February 24, 2022
Related programs
Related FAQs
- #370What do the prohibitions in Directives 1 and 2 mean? Are they blocking actions?
- #371What does OFAC interpret to be debt and equity? Are there other prohibited activities under Directives 1, 2, and 3 under Executive Order (E.O.) 13662? Can U.S. financial institutions continue to maintain correspondent accounts and process U.S. dollar-clearing transactions for the entities subject to the prohibitions of these directives?
- #394If a U.S. person entered into a revolving credit facility or long-term loan arrangement for a person determined to be subject to Directives 1, 2, or 3 prior to the sanctions effective date, what are the restrictions on drawdowns from that facility? Do all drawdowns and disbursements pursuant to the parent agreement need to carry repayment terms of shorter than the applicable tenor specified in the relevant Directive?
- #511For purposes of Executive Order (E.O.) 13808, what does OFAC interpret to be debt and equity? Can U.S. financial institutions continue to maintain correspondent accounts and process U.S. dollar-clearing transactions for the entities subject to these sanctions?
- #553For purposes of E.O. 13808, what is “new debt”?
- #984What does Directive 3 under Executive Order (E.O.) 14024, "Prohibitions Related to New Debt and Equity of Certain Russia-related Entities" (Russia-related Entities Directive) prohibit?
- #986What constitutes debt or equity for purposes of Directive 3 under Executive Order (E.O.) 14024, “Prohibitions Related to New Debt and Equity of Certain Russia-related Entities” (Russia-related Entities Directive)?
- #987If a U.S. person entered into a revolving credit facility or long-term loan agreement for an entity determined to be subject to Russia-related Directive 3 under Executive Order (E.O.) 14024, “Prohibitions Related to New Debt and Equity of Certain Russia-related Entities” (Russia-related Entities Directive) prior to the relevant sanctions effective date described in the Russia-related Entities Directive, what are the restrictions on drawdowns from that facility? Do all drawdowns and disbursements pursuant to the parent agreement need to carry repayment terms of 14 days or less?
- #989Does Russia-related Directive 3 under Executive Order (E.O.) 14024, “Prohibitions Related to New Debt and Equity of Certain Russia-related Entities” (Russia-related Entities Directive) prohibit U.S. persons from engaging in dealings related to debt or equity issued before the relevant sanctions effective date by entities subject to it?