The U.S. leveraged loan market could soon pivot away from the London interbank offered rate (LIBOR) for new deals after officials endorsed a series of forward-looking benchmarks tied to its main U.S. replacement.

The Federal Reserve-backed Alternative Reference Rates Committee's (ARRC's) ratification of a term structure for the Secured Overnight Financing Rate (SOFR) should allow bankers and borrowers to begin using the benchmarks as soon as September, according to Meredith Coffey, executive vice president of research and public policy at the Loan Syndications and Trading Association.

The shift would represent a dramatic change for the more than $1 trillion leveraged loan market, which for decades has relied on LIBOR to underpin the risky floating-rate loans that banks make to companies and then divvy up to investors. It's been among the last markets to make the transition ahead of the yearend deadline to ditch LIBOR for new financings, with industry watchers regularly citing the operational challenges of moving from a forward-looking rate like LIBOR to an overnight rate such as SOFR.