Florida Senate - 2022 SB 1246 By Senator Gruters 23-01121-22 20221246__ 1 A bill to be entitled 2 An act relating to benchmark replacements for London 3 Interbank Offered Rate; creating s. 687.15, F.S.; 4 providing legislative findings and intent and a 5 statement of public interest; defining terms; 6 requiring that recommended benchmark replacements 7 selected or recommended by specified persons be 8 benchmark replacements on the United States dollar 9 London Interbank Offered Rate (LIBOR) replacement date 10 for certain contracts, securities, and instruments; 11 requiring that certain fallback provisions in 12 contracts, securities, and instruments providing 13 specified benchmark replacements be disregarded and 14 void; authorizing specified persons to select 15 benchmark replacements under certain circumstances; 16 providing requirements for such selection; providing 17 applicability; requiring that benchmark replacement 18 conforming changes become an integral part of 19 contracts, securities, and instruments under certain 20 circumstances; providing requirements for selections 21 or uses of recommended benchmark replacements as 22 benchmark replacements; providing construction; 23 providing that a person is not liable for damages and 24 is not subject to claims and requests for equitable 25 relief under certain circumstances; providing 26 applicability; prohibiting other laws from superseding 27 specified provisions; providing that the act is 28 remedial in nature; providing retroactive 29 applicability; providing an effective date. 30 31 Be It Enacted by the Legislature of the State of Florida: 32 33 Section 1. Section 687.15, Florida Statutes, is created to 34 read: 35 687.15 Benchmark replacements for the London Interbank 36 Offered Rate.— 37 (1) The Legislature finds that the discontinuation of the 38 London Interbank Offered Rate (LIBOR) as a viable interest rate 39 threatens the continued viability of certain contracts, 40 securities, and instruments and the rights of the parties to 41 those contracts, securities, or instruments. Furthermore, the 42 threat of unknown and potentially unbounded liability and the 43 viability of contracts, securities, and instruments threatens 44 the state’s economy and has created an overpowering public 45 necessity to provide an immediate and remedial legislative 46 solution. Therefore, the Legislature intends for parties to 47 certain contracts, securities, or instruments, as provided in 48 this section, to enjoy heightened legal protections as a result 49 of the discontinuation of LIBOR. The Legislature also finds that 50 there are no alternative means to meet this public necessity. 51 The Legislature finds that the public interest as a whole is 52 best served by providing certainty to these contracts, 53 securities, and instruments and the parties thereto, so that 54 these contracts, securities, and instruments may remain viable 55 and continue to be enforceable in the state. 56 (2) As used in this section, the term: 57 (a) “Benchmark” means an index of interest rates or 58 dividend rates that is used, in whole or in part, as the basis 59 of, or as a reference for, calculating or determining a 60 valuation, payment, or other measurement under or in respect of 61 a contract, security, or instrument. 62 (b) “Benchmark replacement” means a benchmark, an interest 63 rate, or a dividend rate that may or may not be based, in whole 64 or in part, on a prior setting of LIBOR, to replace LIBOR or any 65 interest rate or dividend rate based on LIBOR, whether on a 66 temporary, permanent, or indefinite basis, under or in respect 67 of a contract, security, or instrument. 68 (c) “Benchmark replacement conforming change” means, with 69 respect to any type of contract, security, or instrument, a 70 technical, administrative, or operational change, alteration, or 71 modification that is associated with and reasonably necessary to 72 the use, adoption, calculation, or implementation of a 73 recommended benchmark replacement and that meets the following 74 conditions: 75 1. The change, alteration, or modification has been 76 selected or recommended by a relevant recommending body. 77 2. If, in the reasonable judgment of the calculating 78 person, the change, alteration, or modification selected or 79 recommended under subparagraph 1. does not apply to the 80 contract, security, or instrument or is insufficient to allow 81 administration and calculation of the recommended benchmark 82 replacement, the benchmark replacement conforming change must 83 include other changes, alterations, or modifications that, in 84 the reasonable judgment of the calculating person: 85 a. Are necessary to allow administration and calculation of 86 the recommended benchmark replacement under or in respect of the 87 contract, security, or instrument in a manner consistent with 88 market practice for substantially similar contracts, securities, 89 or instruments and, to the extent practicable, the manner in 90 which the contract, security, or instrument was administered 91 immediately before the LIBOR replacement date; and 92 b. Would not result in a disposition of the contract, 93 security, or instrument for federal income tax purposes. 94 (d) “Calculating person” means, with respect to any 95 contract, security, or instrument, a person responsible for 96 calculating or determining a valuation, payment, or other 97 measurement based on a benchmark. This person may be the 98 determining person. 99 (e) “Contract, security, or instrument” includes, without 100 limitation, any contract, agreement, mortgage, deed of trust, 101 lease, instrument, obligation, or security, whether representing 102 debt or equity, and including any interest in a corporation, 103 partnership, or limited liability company. 104 (f) “Determining person” means, with respect to any 105 contract, security, or instrument, the following persons in 106 decreasing order of priority: 107 1. A person so specified. 108 2. A person with the authority, right, or obligation to do 109 any of the following: 110 a. Determine the benchmark replacement that will take 111 effect on the LIBOR replacement date. 112 b. Calculate or determine a valuation, payment, or other 113 measurement based on a benchmark. 114 c. Notify other persons of the occurrence of a LIBOR 115 discontinuance event, a LIBOR replacement date, or a benchmark 116 replacement. 117 (g) “Fallback provision” means a term in a contract, 118 security, or instrument which sets forth a methodology or 119 procedure for determining a benchmark replacement, including any 120 term relating to the date on which the benchmark replacement 121 becomes effective, without regard to whether a benchmark 122 replacement can be determined in accordance with the methodology 123 or procedure. 124 (h) “LIBOR” means, for purposes of the application of this 125 section to any particular contract, security, or instrument, the 126 United States dollar LIBOR, formerly known as the London 127 Interbank Offered Rate, as administered by ICE Benchmark 128 Administration, or any predecessor or successor thereof, or any 129 tenor thereof, as applicable, that is used in making any 130 calculation or determination of benchmark rates. 131 (i)1. “LIBOR discontinuance event” means the earliest to 132 occur of any of the following: 133 a. A public statement or publication of information by, or 134 on behalf of, the administrator of LIBOR announcing that the 135 administrator has ceased or will cease to provide LIBOR 136 permanently or indefinitely, if, at the time of the statement or 137 publication, there is no successor administrator that will 138 continue to provide LIBOR. 139 b. A public statement or publication of information by the 140 regulatory supervisor for the administrator of LIBOR, the 141 Federal Reserve System, an insolvency official with jurisdiction 142 over the administrator of LIBOR, a resolution authority with 143 jurisdiction over the administrator of LIBOR, or a court or an 144 entity with similar insolvency or resolution authority over the 145 administrator of LIBOR, announcing that the administrator of 146 LIBOR has ceased or will cease to provide LIBOR permanently or 147 indefinitely, if, at the time of the statement or publication, 148 there is no successor administrator that will continue to 149 provide LIBOR. 150 c. A public statement or publication of information by the 151 regulatory supervisor for the administrator of LIBOR announcing 152 that LIBOR is no longer representative. 153 2. A public statement or publication of information that 154 affects one or more tenors of LIBOR does not constitute a LIBOR 155 discontinuance event with respect to a contract, security, or 156 instrument that: 157 a. Provides for only one tenor of LIBOR, if the contract, 158 security, or instrument requires interpolation and the tenor can 159 be interpolated from LIBOR tenors that are not so affected; or 160 b. Allows a party to choose from more than one tenor of 161 LIBOR and any of the tenors is not so affected or, if the 162 contract, security, or instrument requires interpolation, can be 163 interpolated from LIBOR tenors that are not so affected. 164 (j)1. “LIBOR replacement date” means: 165 a. In the case of a LIBOR discontinuance event described in 166 sub-subparagraph (i)1.a. or sub-subparagraph (i)1.b., the later 167 of: 168 (I) The date of the public statement or publication of 169 information referenced in sub-subparagraph (i)1.a. or sub 170 subparagraph (i)1.b.; or 171 (II) The date on which the administrator of LIBOR 172 permanently or indefinitely ceases to provide LIBOR. 173 b. In the case of a LIBOR discontinuance event described in 174 sub-subparagraph (i)1.c., the date of the public statement or 175 publication of information referenced in sub-subparagraph 176 (i)1.c. 177 2. A date that affects one or more tenors of LIBOR does not 178 constitute a LIBOR replacement date with respect to a contract, 179 security, or instrument that: 180 a. Provides for only one tenor of LIBOR, if the contract, 181 security, or instrument requires interpolation and the tenor can 182 be interpolated from LIBOR tenors that are not so affected; or 183 b. Allows a party to choose from more than one tenor of 184 LIBOR and any of the tenors is not so affected or, if the 185 contract, security, or instrument requires interpolation, can be 186 interpolated from LIBOR tenors that are not so affected. 187 (k) “Recommended benchmark replacement” means, with respect 188 to any particular type of contract, security, or instrument, a 189 benchmark replacement based on SOFR that must include any 190 recommended spread adjustment and any benchmark replacement 191 conforming change that have been selected or recommended by a 192 relevant recommending body with respect to the type of contract, 193 security, or instrument. 194 (l) “Recommended spread adjustment” means a spread 195 adjustment, or method for calculating or determining the spread 196 adjustment, which has been selected or recommended by a relevant 197 recommending body for a recommended benchmark replacement for a 198 particular type of contract, security, or instrument and for a 199 particular term to account for the effects of the transition or 200 change from LIBOR to a recommended benchmark replacement. This 201 term may be a positive or negative value or zero. 202 (m) “Relevant recommending body” means the Federal Reserve 203 Board, the Federal Reserve Bank of New York, the Alternative 204 Reference Rates Committee, or a successor to any of them. 205 (n) “SOFR” means, with respect to any day, the secured 206 overnight financing rate published for the day by the Federal 207 Reserve Bank of New York as the administrator of the benchmark, 208 or a successor administrator, on the Federal Reserve Bank of New 209 York’s website. 210 (3) On the LIBOR replacement date, the recommended 211 benchmark replacement, by operation of law, shall be the 212 benchmark replacement for a contract, security, or instrument 213 that uses LIBOR as a benchmark and that: 214 (a) Does not contain a fallback provision; or 215 (b) Contains fallback provisions resulting in a benchmark 216 replacement, other than a recommended benchmark replacement, 217 that is based in any way on a LIBOR value. 218 (4) After the occurrence of a LIBOR discontinuance event, 219 any fallback provisions in a contract, security, or instrument 220 which provide for a benchmark replacement based on or otherwise 221 involving a poll, survey, or inquiry for quotes or information 222 concerning interbank lending rates or any interest rate or 223 dividend rate based on LIBOR shall be void and of no force or 224 effect. 225 (5)(a) A determining person may, but is not required to, 226 select the recommended benchmark replacement as the benchmark 227 replacement after the occurrence of a LIBOR discontinuance 228 event. The selection of the recommended benchmark replacement 229 must be: 230 1. Irrevocable; 231 2. Made by the earlier of the LIBOR replacement date or the 232 latest date for selecting a benchmark replacement according to 233 the contract, security, or instrument; and 234 3. Used in any determination of the benchmark under or with 235 respect to the contract, security, or instrument occurring on 236 and after the LIBOR replacement date. 237 (b) Paragraph (a) applies to a contract, security, or 238 instrument that uses LIBOR as a benchmark and that contains 239 fallback provisions allowing or requiring the selection of a 240 benchmark replacement that is: 241 1. Based in any way on a LIBOR value; or 242 2. The substantive equivalent of paragraph (7)(a), 243 paragraph (7)(b), or paragraph (7)(c). 244 (6) If a recommended benchmark replacement becomes the 245 benchmark replacement for a contract, security, or instrument 246 under this section, then all benchmark replacement conforming 247 changes that are applicable to the recommended benchmark 248 replacement must become an integral part of the contract, 249 security, or instrument by operation of law. 250 (7) The selection or use of a recommended benchmark 251 replacement as a benchmark replacement under or in respect of a 252 contract, security, or instrument by operation of this section 253 must constitute all of the following: 254 (a) A commercially reasonable replacement for and a 255 commercially substantial equivalent to LIBOR. 256 (b) A reasonable, comparable, or analogous term for LIBOR 257 under or in respect of the contract, security, or instrument. 258 (c) A replacement that is based on a methodology or 259 information that is similar or comparable to LIBOR. 260 (d) Substantial performance by any person of any right or 261 obligation relating to or based on LIBOR under or in respect of 262 a contract, security, or instrument. 263 (8) A LIBOR discontinuance event, a LIBOR replacement date, 264 the selection or use of a recommended benchmark replacement as a 265 benchmark replacement, or the determination, implementation, or 266 performance of a benchmark replacement conforming change, in 267 each case, by operation of this section, may not: 268 (a) Be deemed to impair or affect the right of any person 269 to receive a payment, or affect the amount or timing of the 270 payment, under a contract, security, or instrument; 271 (b) Have the effect of discharging or excusing performance 272 under a contract, security, or instrument for any reason, claim, 273 or defense, including, but not limited to, any force majeure or 274 other provision in a contract, security, or instrument; 275 (c) Have the effect of giving any person the right to 276 unilaterally terminate or suspend performance under a contract, 277 security, or instrument; 278 (d) Have the effect of constituting a breach of a contract, 279 security, or instrument; or 280 (e) Have the effect of voiding or nullifying a contract, 281 security, or instrument. 282 (9) A person is not liable for damages to any other person, 283 and is not subject to any claim or request for equitable relief, 284 arising out of or related to the selection or use of a 285 recommended benchmark replacement or the determination, 286 implementation, or performance of a benchmark replacement 287 conforming change, in each case, by operation of this section. 288 The selection or use of the recommended benchmark replacement or 289 the determination, implementation, or performance of a benchmark 290 replacement conforming change may not give rise to any claim or 291 cause of action by any person in law or in equity. 292 (10) The selection or use of a recommended benchmark 293 replacement or the determination, implementation, or performance 294 of a benchmark replacement conforming change, by operation of 295 this section, may not be deemed to: 296 (a) Be an amendment or modification of a contract, 297 security, or instrument. 298 (b) Prejudice, impair, or affect a person’s rights, 299 interests, or obligations under or in respect of a contract, 300 security, or instrument. 301 (11) Except as provided in subsection (3) or subsection 302 (5), this section may not be interpreted as creating a negative 303 inference or negative presumption regarding the validity or 304 enforceability of any of the following: 305 (a) A benchmark replacement that is not a recommended 306 replacement benchmark. 307 (b) A spread adjustment, or method for calculating or 308 determining a spread adjustment, which is not a recommended 309 spread adjustment. 310 (c) A change, alteration, or modification to or in respect 311 of a contract, security, or instrument which is not a benchmark 312 replacement conforming change. 313 (12) This section does not alter or impair any of the 314 following: 315 (a) A written agreement by all requisite parties which, 316 retrospectively or prospectively, provides that a contract, 317 security, or instrument is not subject to this section without 318 necessarily referring specifically to this section. As used in 319 this paragraph, the term “requisite parties” means all parties 320 required to amend the terms and provisions of a contract, 321 security, or instrument that would otherwise be altered or 322 affected by this section. 323 (b) A contract, security, or instrument that contains 324 fallback provisions that would result in a benchmark replacement 325 that is not based on LIBOR, including, but not limited to, the 326 prime rate or the federal funds rate. However, the contract, 327 security, or instrument is subject to subsection (4). 328 (c) A contract, security, or instrument subject to 329 subsection (5) as to which a determining person does not elect 330 to use a recommended benchmark replacement or as to which a 331 determining person elects to use a recommended benchmark 332 replacement before the occurrence of a LIBOR discontinuance 333 event. However, the contract, security, or instrument is subject 334 to subsection (4). 335 (d) The application to a recommended benchmark replacement 336 of any cap, floor, modifier, or spread adjustment to which LIBOR 337 had been subject pursuant to the terms of a contract, security, 338 or instrument. 339 (13) Notwithstanding the Uniform Commercial Code or any 340 other law of this state, and except as otherwise provided in 341 this section, this section applies to all contracts, securities, 342 and instruments, including contracts with respect to commercial 343 transactions, and may not be superseded by any other law of this 344 state. 345 Section 2. This act is remedial in nature and applies 346 retroactively to all contracts, agreements, mortgages, deeds of 347 trust, leases, instruments, obligations, or securities, whether 348 representing debt or equity, and including all interests in a 349 corporation, partnership, or limited liability company, in 350 existence on December 31, 2021. 351 Section 3. This act shall take effect upon becoming a law.