Florida Senate - 2022 COMMITTEE AMENDMENT Bill No. SB 1246 Ì235134~Î235134 LEGISLATIVE ACTION Senate . House . . . . . ————————————————————————————————————————————————————————————————— ————————————————————————————————————————————————————————————————— The Committee on Commerce and Tourism (Gruters) recommended the following: 1 Senate Amendment (with title amendment) 2 3 Delete everything after the enacting clause 4 and insert: 5 Section 1. Section 687.15, Florida Statutes, is created to 6 read: 7 687.15 Benchmark replacements for the London Interbank 8 Offered Rate.— 9 (1) The Legislature finds that the discontinuation of the 10 London Interbank Offered Rate (LIBOR) as a viable interest rate 11 threatens the continued viability of certain contracts, 12 securities, and instruments and the rights of the parties to 13 those contracts, securities, or instruments. Furthermore, the 14 threat of unknown and potentially unbounded liability and the 15 viability of contracts, securities, and instruments threatens 16 the state’s economy and has created an overpowering public 17 necessity to provide an immediate and remedial legislative 18 solution. Therefore, the Legislature intends for parties to 19 certain contracts, securities, or instruments, as provided in 20 this section, to enjoy heightened legal protections as a result 21 of the discontinuation of LIBOR. The Legislature also finds that 22 there are no alternative means to meet this public necessity. 23 The Legislature finds that the public interest as a whole is 24 best served by providing certainty to these contracts, 25 securities, and instruments and the parties thereto, so that 26 these contracts, securities, and instruments may remain viable 27 and continue to be enforceable in the state. 28 (2) As used in this section, the term: 29 (a) “Benchmark” means an index of interest rates or 30 dividend rates that is used, in whole or in part, as the basis 31 of, or as a reference for, calculating or determining a 32 valuation, payment, or other measurement under or with respect 33 to a contract, security, or instrument. 34 (b) “Benchmark replacement” means a benchmark, an interest 35 rate, or a dividend rate that may or may not be based, in whole 36 or in part, on a prior setting of LIBOR, to replace LIBOR or any 37 interest rate or dividend rate based on LIBOR, whether on a 38 temporary, permanent, or indefinite basis, under or with respect 39 to a contract, security, or instrument. 40 (c) “Benchmark replacement conforming change” means, with 41 respect to any type of contract, security, or instrument, a 42 technical, administrative, or operational change, alteration, or 43 modification that is associated with and reasonably necessary to 44 the use, adoption, calculation, or implementation of a 45 recommended benchmark replacement and that has been selected or 46 recommended by a relevant recommending body. However, if, in the 47 reasonable judgment of a calculating person, the change, 48 alteration, or modification selected or recommended by a 49 relevant recommending body does not apply to the contract, 50 security, or instrument or is insufficient to allow 51 administration and calculation of the recommended benchmark 52 replacement, the benchmark replacement conforming change may 53 include other changes, alterations, or modifications that, in 54 the reasonable judgment of the calculating person: 55 1. Are necessary to allow administration and calculation of 56 the recommended benchmark replacement under or with respect to 57 the contract, security, or instrument in a manner consistent 58 with market practice for substantially similar contracts, 59 securities, or instruments and, to the extent practicable, the 60 manner in which the contract, security, or instrument was 61 administered immediately before the LIBOR replacement date. 62 2. Would not result in a disposition of the contract, 63 security, or instrument for federal income tax purposes. 64 (d) “Calculating person” means, with respect to any 65 contract, security, or instrument, a person responsible for 66 calculating or determining a valuation, payment, or other 67 measurement based on a benchmark. This person may be the 68 determining person. 69 (e) “Contract, security, or instrument” includes, without 70 limitation, any contract, agreement, mortgage, deed of trust, 71 lease, instrument, obligation, or security, whether representing 72 debt or equity, and including any interest in a corporation, 73 partnership, or limited liability company. 74 (f) “Determining person” means, with respect to any 75 contract, security, or instrument, the following persons in 76 decreasing order of priority: 77 1. A person so specified. 78 2. A person with the authority, right, or obligation to do 79 any of the following: 80 a. Determine the benchmark replacement that will take 81 effect on the LIBOR replacement date. 82 b. Calculate or determine a valuation, payment, or other 83 measurement based on a benchmark. 84 c. Notify other persons of the occurrence of a LIBOR 85 discontinuance event, a LIBOR replacement date, or a benchmark 86 replacement. 87 (g) “Fallback provision” means a term in a contract, 88 security, or instrument which sets forth a methodology or 89 procedure for determining a benchmark replacement, including any 90 term relating to the date on which the benchmark replacement 91 becomes effective, without regard to whether a benchmark 92 replacement can be determined in accordance with the methodology 93 or procedure. 94 (h) “LIBOR” means, for purposes of the application of this 95 section to any particular contract, security, or instrument, the 96 United States dollar LIBOR, formerly known as the London 97 Interbank Offered Rate, as administered by ICE Benchmark 98 Administration, or any predecessor or successor thereof, or any 99 tenor thereof, as applicable, that is used in making any 100 calculation or determination of benchmark rates. 101 (i)1. “LIBOR discontinuance event” means the earliest to 102 occur of any of the following: 103 a. A public statement or publication of information by, or 104 on behalf of, the administrator of LIBOR announcing that the 105 administrator has ceased or will cease to provide LIBOR 106 permanently or indefinitely, if, at the time of the statement or 107 publication, there is no successor administrator that will 108 continue to provide LIBOR. 109 b. A public statement or publication of information by the 110 regulatory supervisor for the administrator of LIBOR, the 111 Federal Reserve System, an insolvency official with jurisdiction 112 over the administrator of LIBOR, a resolution authority with 113 jurisdiction over the administrator of LIBOR, or a court or an 114 entity with similar insolvency or resolution authority over the 115 administrator of LIBOR, announcing that the administrator of 116 LIBOR has ceased or will cease to provide LIBOR permanently or 117 indefinitely, if, at the time of the statement or publication, 118 there is no successor administrator that will continue to 119 provide LIBOR. 120 c. A public statement or publication of information by the 121 regulatory supervisor for the administrator of LIBOR announcing 122 that LIBOR is no longer representative. 123 2. A public statement or publication of information that 124 affects one or more tenors of LIBOR does not constitute a LIBOR 125 discontinuance event with respect to a contract, security, or 126 instrument that: 127 a. Provides for only one tenor of LIBOR, if the contract, 128 security, or instrument requires interpolation and the tenor can 129 be interpolated from LIBOR tenors that are not so affected; or 130 b. Allows a party to choose from more than one tenor of 131 LIBOR and any of the tenors is not so affected or, if the 132 contract, security, or instrument requires interpolation, can be 133 interpolated from LIBOR tenors that are not so affected. 134 (j)1. “LIBOR replacement date” means: 135 a. In the case of a LIBOR discontinuance event described in 136 sub-subparagraph (i)1.a. or sub-subparagraph (i)1.b., the later 137 of: 138 (I) The date of the public statement or publication of 139 information referenced in sub-subparagraph (i)1.a. or sub 140 subparagraph (i)1.b.; or 141 (II) The date on which the administrator of LIBOR 142 permanently or indefinitely ceases to provide LIBOR. 143 b. In the case of a LIBOR discontinuance event described in 144 sub-subparagraph (i)1.c., the date of the public statement or 145 publication of information referenced in sub-subparagraph 146 (i)1.c. 147 2. A date that affects one or more tenors of LIBOR does not 148 constitute a LIBOR replacement date with respect to a contract, 149 security, or instrument that: 150 a. Provides for only one tenor of LIBOR, if the contract, 151 security, or instrument requires interpolation and the tenor can 152 be interpolated from LIBOR tenors that are not so affected; or 153 b. Allows a party to choose from more than one tenor of 154 LIBOR and any of the tenors is not so affected or, if the 155 contract, security, or instrument requires interpolation, can be 156 interpolated from LIBOR tenors that are not so affected. 157 (k) “Recommended benchmark replacement” means, with respect 158 to any particular type of contract, security, or instrument, a 159 benchmark replacement based on SOFR that must include any 160 recommended spread adjustment and any benchmark replacement 161 conforming change that have been selected or recommended by a 162 relevant recommending body with respect to the type of contract, 163 security, or instrument. 164 (l) “Recommended spread adjustment” means a spread 165 adjustment, or method for calculating or determining the spread 166 adjustment, which has been selected or recommended by a relevant 167 recommending body for a recommended benchmark replacement for a 168 particular type of contract, security, or instrument and for a 169 particular term to account for the effects of the transition or 170 change from LIBOR to a recommended benchmark replacement. This 171 term may be a positive or negative value or zero. 172 (m) “Relevant recommending body” means the Federal Reserve 173 Board, the Federal Reserve Bank of New York, the Alternative 174 Reference Rates Committee, or a successor to any of them. 175 (n) “SOFR” means, with respect to any day, the secured 176 overnight financing rate published for the day by the Federal 177 Reserve Bank of New York as the administrator of the benchmark, 178 or a successor administrator, on the Federal Reserve Bank of New 179 York’s website. 180 (3) On the LIBOR replacement date, the recommended 181 benchmark replacement, by operation of law, shall be the 182 benchmark replacement for a contract, security, or instrument 183 that uses LIBOR as a benchmark and that: 184 (a) Does not contain a fallback provision; or 185 (b) Contains fallback provisions resulting in a benchmark 186 replacement, other than a recommended benchmark replacement, 187 that is based in any way on a LIBOR value. 188 (4) After the occurrence of a LIBOR discontinuance event, 189 any fallback provisions in a contract, security, or instrument 190 which provide for a benchmark replacement based on or otherwise 191 involving a poll, survey, or inquiry for quotes or information 192 concerning interbank lending rates or any interest rate or 193 dividend rate based on LIBOR shall be void and of no force or 194 effect. 195 (5)(a) A determining person may, but is not required to, 196 select the recommended benchmark replacement as the benchmark 197 replacement after the occurrence of a LIBOR discontinuance 198 event. The selection of the recommended benchmark replacement 199 must be: 200 1. Irrevocable; 201 2. Made by the earlier of the LIBOR replacement date or the 202 latest date for selecting a benchmark replacement according to 203 the contract, security, or instrument; and 204 3. Used in any determination of the benchmark under or with 205 respect to the contract, security, or instrument occurring on 206 and after the LIBOR replacement date. 207 (b) Paragraph (a) applies to a contract, security, or 208 instrument that uses LIBOR as a benchmark and that contains 209 fallback provisions allowing or requiring the selection of a 210 benchmark replacement that is: 211 1. Based in any way on a LIBOR value; or 212 2. The substantive equivalent of paragraph (7)(a), 213 paragraph (7)(b), or paragraph (7)(c). 214 (6) If a recommended benchmark replacement becomes the 215 benchmark replacement for a contract, security, or instrument 216 under this section, then all benchmark replacement conforming 217 changes that are applicable to the recommended benchmark 218 replacement must become an integral part of the contract, 219 security, or instrument by operation of law. 220 (7) The selection or use of a recommended benchmark 221 replacement as a benchmark replacement under or with respect to 222 a contract, security, or instrument by operation of this section 223 constitutes all of the following: 224 (a) A commercially reasonable replacement for and a 225 commercially substantial equivalent to LIBOR. 226 (b) A reasonable, comparable, or analogous term for LIBOR 227 under or with respect to the contract, security, or instrument. 228 (c) A replacement that is based on a methodology or 229 information that is similar or comparable to LIBOR. 230 (d) Substantial performance by any person of any right or 231 obligation relating to or based on LIBOR under or with respect 232 to a contract, security, or instrument. 233 (8) A LIBOR discontinuance event, a LIBOR replacement date, 234 the selection or use of a recommended benchmark replacement as a 235 benchmark replacement, or the determination, implementation, or 236 performance of a benchmark replacement conforming change, in 237 each case, by operation of this section, may not: 238 (a) Be deemed to impair or affect the right of any person 239 to receive a payment, or affect the amount or timing of the 240 payment, under a contract, security, or instrument; 241 (b) Have the effect of discharging or excusing performance 242 under a contract, security, or instrument for any reason, claim, 243 or defense, including, but not limited to, any force majeure or 244 other provision in a contract, security, or instrument; 245 (c) Have the effect of giving any person the right to 246 unilaterally terminate or suspend performance under a contract, 247 security, or instrument; 248 (d) Have the effect of constituting a breach of a contract, 249 security, or instrument; or 250 (e) Have the effect of voiding or nullifying a contract, 251 security, or instrument. 252 (9) A person is not liable for damages to any other person, 253 and is not subject to any claim or request for equitable relief, 254 arising out of or related to the selection or use of a 255 recommended benchmark replacement or the determination, 256 implementation, or performance of a benchmark replacement 257 conforming change, in each case, by operation of this section. 258 The selection or use of the recommended benchmark replacement or 259 the determination, implementation, or performance of a benchmark 260 replacement conforming change may not give rise to any claim or 261 cause of action by any person in law or in equity. 262 (10) The selection or use of a recommended benchmark 263 replacement or the determination, implementation, or performance 264 of a benchmark replacement conforming change, by operation of 265 this section, may not be deemed to: 266 (a) Be an amendment or modification of a contract, 267 security, or instrument. 268 (b) Prejudice, impair, or affect a person’s rights, 269 interests, or obligations under or with respect to a contract, 270 security, or instrument. 271 (11) Except as provided in subsection (3) or subsection 272 (5), this section may not be interpreted as creating a negative 273 inference or negative presumption regarding the validity or 274 enforceability of any of the following: 275 (a) A benchmark replacement that is not a recommended 276 benchmark replacement. 277 (b) A spread adjustment, or method for calculating or 278 determining a spread adjustment, which is not a recommended 279 spread adjustment. 280 (c) A change, alteration, or modification to or with 281 respect to a contract, security, or instrument which is not a 282 benchmark replacement conforming change. 283 (12) This section does not alter or impair any of the 284 following: 285 (a) A written agreement by all requisite parties which, 286 retrospectively or prospectively, provides that a contract, 287 security, or instrument is not subject to this section without 288 necessarily referring specifically to this section. As used in 289 this paragraph, the term “requisite parties” means all parties 290 required to amend the terms and provisions of a contract, 291 security, or instrument that would otherwise be altered or 292 affected by this section. 293 (b) A contract, security, or instrument that contains 294 fallback provisions that would result in a benchmark replacement 295 that is not based on LIBOR, including, but not limited to, the 296 prime rate or the federal funds rate. However, the contract, 297 security, or instrument is subject to subsection (4). 298 (c) A contract, security, or instrument subject to 299 subsection (5) as to which a determining person does not elect 300 to use a recommended benchmark replacement or as to which a 301 determining person elects to use a recommended benchmark 302 replacement before the occurrence of a LIBOR discontinuance 303 event. However, the contract, security, or instrument is subject 304 to subsection (4). 305 (d) The application to a recommended benchmark replacement 306 of any cap, floor, modifier, or spread adjustment to which LIBOR 307 had been subject pursuant to the terms of a contract, security, 308 or instrument. 309 (13) Notwithstanding the Uniform Commercial Code or any 310 other law of this state, and except as otherwise provided in 311 this section, this section applies to all contracts, securities, 312 and instruments, including contracts with respect to commercial 313 transactions, and may not be superseded by any other law of this 314 state. 315 Section 2. This act is remedial in nature and applies 316 retroactively to all contracts, agreements, mortgages, deeds of 317 trust, leases, instruments, obligations, or securities, whether 318 representing debt or equity, and including all interests in a 319 corporation, partnership, or limited liability company, in 320 existence on December 31, 2021. 321 Section 3. This act shall take effect upon becoming a law. 322 323 ================= T I T L E A M E N D M E N T ================ 324 And the title is amended as follows: 325 Delete everything before the enacting clause 326 and insert: 327 A bill to be entitled 328 An act relating to benchmark replacements for London 329 Interbank Offered Rate; creating s. 687.15, F.S.; 330 providing legislative findings and intent and a 331 statement of public interest; providing definitions; 332 requiring that recommended benchmark replacements 333 selected or recommended by specified persons be 334 benchmark replacements on the United States dollar 335 London Interbank Offered Rate (LIBOR) replacement date 336 for certain contracts, securities, and instruments; 337 requiring certain fallback provisions in contracts, 338 securities, and instruments providing specified 339 benchmark replacements to be disregarded and void; 340 authorizing specified persons to select benchmark 341 replacements under certain circumstances; providing 342 requirements for such selection; providing 343 applicability; requiring benchmark replacement 344 conforming changes to become an integral part of 345 contracts, securities, and instruments under certain 346 circumstances; providing construction; providing that 347 a person is not liable for damages and is not subject 348 to claims and requests for equitable relief under 349 certain circumstances; providing applicability; 350 prohibiting other laws from superseding specified 351 provisions; providing that the act is remedial in 352 nature; providing retroactive applicability; providing 353 an effective date.