1. Interest rates - reference rates - transition from LIBOR to other RFRs - rate switching.
In this context, a hardwired approach refers to the mechanism for switching a reference interest rate from LIBOR to another appropriate risk-free rate, because of the discontinuation of LIBOR.
The wording of provisions in loan agreements broadly follow either an amendment approach or a hardwired approach to the rate switch.
A hardwired approach anticipates the transition from LIBOR and sets all the terms for the transition at the origination of the loan, avoiding the need for any future amendments in most cases.
- Hardwired rate switch wording accommodated in RCF
- "Alongside its ESG core, the RCF was one of the first products of its kind to include hardwired switch wording to anticipate the discontinuation of LIBOR.
- In a market dominated by efforts to build contingencies against COVID-19, Ahold Delhaize faced challenges with encouraging its lenders to focus and align on that aspect of the deal.
- However, in light of the firm’s track record as a credible borrower with a clear IBOR reform plan, constructive legal counsels and a facility agent were able to accommodate the feature operationally.
- Rewarding discussions, concluded in a tight time frame, produced wording that satisfied all parties and set an example for other deals to follow."
- ACT Deals of the Year Awards 2020 - Ahold Delhaize
2. Information technology - hardware.
Hard-wired systems and processes are ones embedded in IT hardware, and are relatively more difficult - or impossible - for the user to change.
Contrasted with software-based systems and processes.
Connected by fixed cables, rather than wirelessly.
3. Behavioural skills - organisations - individuals.
By analogy, innate behaviours that are less easy to modify.
By extension, certain learned - but deeply embedded - behaviours in individuals, organisations or wider groups.