STAG Industrial, Inc. 10-Q

Item 1A. Risk Factors Other than the following, there have been no material changes from the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on February 10, 2021. We may be adversely affected by developments in the LIBOR market or the use of alternative reference rates. As of March 31, 2021, approximately 65.7% or $1,208.0 million of our outstanding debt was indexed to LIBOR. On March 5, 2021, the Financial Conduct Authority (“FCA”) announced that U.S. dollar LIBOR will no longer be published after June 30, 2023. This announcement has several implications, including setting the spread that may be used to automatically convert contracts from LIBOR to the Secured Overnight Financing Rate (“SOFR”). Additionally, banking regulators are encouraging banks to discontinue new LIBOR debt issuances by December 31, 2021. While we expect LIBOR to be available in substantially its current form until June 30, 2023, it is possible that LIBOR will become unavailable prior to that date. For example, if sufficient banks decline to make submissions to the LIBOR administrator, LIBOR may become unavailable and the risks associated with the transition to an alternative reference rate will be accelerated and magnified. Any changes adopted by the FCA or other governing bodies in the method used for determining LIBOR or the transition from LIBOR to a successor benchmark may result in, among other things, (i) a sudden or prolonged increase or decrease in reported LIBOR, (ii) a delay in the publication of LIBOR, (iii) higher interest obligations arising from such successor benchmark, (iv) changes in the rules or methodologies for determining LIBOR in the overall debt capital markets, which may discourage market participants from continuing to administer or to participate in variable rate debt tied to LIBOR or such successor benchmark, (v) the introduction of financial products and changes in market practices, which may lead to risk modeling and valuation challenges, such as adjusting interest rate accrual calculations and building a term structure for an alternative rate, (vi) additional basis risk and increased volatility as alternative rates are phased in and utilized in parallel with LIBOR, and (vii) adjustments to systems and mathematical models to properly process and account for alternative rates, which may strain the model risk management and information technology functions and result in substantial incremental costs. If LIBOR as determined in accordance with the terms of our particular debt is no longer available, whether before or after June 30, 2023, the interest rates on such debt would be determined using various alternative methods, any of which may result in interest obligations which are more than or do not otherwise correlate over time with the payments that would have been made on such debt if LIBOR was available in its current form. We are monitoring and evaluating the risks related to our debt indexed to LIBOR, which include interest on loans or amounts received and paid on derivative instruments. These risks arise in connection with transitioning contracts to an alternative rate, including any resulting value transfer that may occur, and are likely to vary by contract. The value of loans, securities, or derivative instruments tied to LIBOR, as well as interest rates on our current or future indebtedness, may also be impacted if LIBOR is limited or discontinued. For some instruments, the method of transitioning to an alternative reference rate may be challenging, especially if we cannot agree with the respective counterparty about how to make the transition. As a result, there can be no assurance that any of the aforementioned developments or changes will not result in financial market disruptions, significant increases in benchmark interest rates, substantially higher financing costs or a shortage of available debt financing, any of which could have an adverse effect on us. 46 Table of Contents