Increasingly, some banks have been including a provision in their commercial loan agreements that deems the variable interest rate on a loan to be zero, if the reference rate on the loan (for example, LIBOR) goes negative.  This type of a provision is sometimes referred to as a “deemed zero” clause.  This blog posting looks at issues that banks and borrowers alike may want to consider with respect to the documentation of an interest rate swap that is used to hedge the borrower’s interest rate exposure on a loan that contains a “deemed zero” clause.

Continue Reading Dealing with “Deemed Zero Rates” in Loan Agreements and Related Interest Rate Swap Documentation