RIP CDOR 1986-2024: A Recap of CDOR’s Final Days

RIP CDOR 1986-2024: A Recap of CDOR’s Final Days

On June 28, 2024, the Canadian Dollar Offered Rate (“CDOR”) was published for the last time, marking the end of CDOR. The transition away from CDOR to the Canadian Overnight Repo Rate Average (“CORRA”) was accomplished in an orderly fashion, on a tight timeline.

In this bulletin we review the last days of CDOR and confirm that the market has adopted CORRA as the Canadian dollar risk-free rate benchmark, and more specifically, both Term CORRA and Daily Compounded CORRA.

1.         CDOR Ceased Being Published on June 28, 2024

As first announced on May 16, 2022[1], CDOR was published for the last time on June 28, 2024. The Canadian Alternative Reference Rate Working Group (“CARR”) concluded that the cessation date went smoothly and that the transition itself was successful.[2]

Further, CARR noted that there was considerable effort to convert loans from CDOR to CORRA in the last two weeks of June, resulting in almost all bilateral loans being converted to CORRA, as well as most syndicated loans. CARR members do not expect issues with transitioning the remaining syndicated loans.

CARR had previously explained that converting CDOR loans issued by non-Canadian banks (which are generally syndicated loans) has been more challenging than converting those issued by Canadian banks as there are more parties that need to consent to the changes.[3] CARR had also observed that non-Canadian banks are increasingly using “suspension of rights” letters, which are issued under credit facilities that have not been converted from CDOR to CORRA. These letters provide that the borrower relinquishes the ability to borrow using CDOR. We would add that this aligns with our experience, as many non-Canadian banks have not obtained a Term CORRA license from TMX Datalinx, which is required to fund using Term CORRA.

Interestingly, CARR also concluded that the transition away from CDOR was “better” than the transition away from LIBOR in the US, with fewer CDOR loans remaining in place after the cessation date. They noted that this may be because there is no synthetic CDOR option or Canadian legislative solution for CDOR legacy contracts.

As a final reminder, the discontinuation of CDOR also ended the issuance of Banker’s Acceptances as a financial instrument in the Canadian capital market.

Lastly, CARR will be disbanding following its final meeting on October 4, 2024.

2.         CORRA Loan Trends

CARR’s latest monthly report on Canadian dollar loans that reference or have transitioned to CORRA and Term CORRA, which was released on August 6, 2024, shows that the number of CDOR loans decreased dramatically between May 2024 and June 2024.[4] The total dollar value of CDOR loans was CAD 398,391,000 in May 2024, decreasing to CAD 67,715,000 in June 2024.

Further, roughly 10% (in dollar value) of loans in June 2024 referenced only CORRA (whether Daily Compounded CORRA or Daily Simple CORRA), 31% referenced only Term CORRA and 59% referenced both CORRA and Term CORRA. This is trending towards more loans referencing both CORRA and Term CORRA when compared with the numbers from the May 2024 report (which is discussed in our previous bulletin). This is also consistent with our experience, as most of the loan agreements we see reference both Term CORRA and Daily Compounded CORRA.

3.         Conclusion

We will continue to monitor developments with respect to CORRA and will publish periodic updates as necessary. If you have any questions about the cessation of CDOR or about CORRA, please reach out to the authors.

[1] Refinitv Benchmark Services (UK) Limited, “Announcement of Cessation of CDOR in June 2024” (May 16, 2022).
[2] Canadian Alternative Reference Rate Working Group, “Minutes of the Canadian Alternative Reference Rate Working Group” (July 8, 2024).
[3] Canadian Alternative Reference Rate Working Group, “Minutes of the Canadian Alternative Reference Rate Working Group” (June 24, 2024).
[4] Canadian Alternative Reference Rate Working Group, “From CDOR to CORRA: Monthly indicative loan CORRA/Term CORRA transition update” (August 6, 2024).

by Shahen Mirakian and Maria Sagan

A Cautionary Note

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2024