USD 3-month LIBOR
![](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiqdMFbWUf9Q2Vp0mJK0WO8bs55CI4Vn89fR8YAbY-DABc1Ga4qHrVqVDmAXFisTBNZOaWkv1hQFV4K67btdYOaE3Ix1XQB_FTRV4jptpmNt5-hj1U0WhEZULqYo2VX5vPFCcWORAAx9XnN/s400/3+month+libor.png)
A typical non-investment grade corporate loan may pay LIBOR + 2-3%. With the 3-month LIBOR at 47 bp, the current yield is under 4% (plus capital appreciation), making such asset a fairly unattractive investment. That is why on new corporate loans, the lenders now insist on an imbedded LIBOR floor.
From LPC (Loan Pricing Corporation):
Libor floors have taken hold among refinanced credits. The majority of Libor floors among leveraged credits have averaged 2%, although it remains to be seen whether this may be stepped up to 2.5% or even 3%.
For example, the CIT rescue loan has a 3% LIBOR floor. Going forward, it's going to be increasingly difficult to get floating rate financing without this feature.