Florida Enacts House Bill 925 Addressing LIBOR Transition
On April 6, 2022, Florida enacted House Bill 925 (HB925, or the Florida Bill) facilitating the transition away from the London Interbank Offered Rate (LIBOR), which is used as a benchmark rate in more than 200 trillion dollars’ worth of contracts worldwide and is set to be discontinued.
It is important to note that on March 15, 2022, President Joe Biden signed into law the Consolidated Appropriations Act of 2022 (the Act), which addresses the LIBOR transition. Among other changes, the Act preempts any provision of state or local law relating to the selection or use of a benchmark replacement for LIBOR or related conforming changes. Accordingly, as WBK previously reported, the Act may supersede some portions of the state legislation discussed below.
The Florida Bill sets standards for the replacement of LIBOR in contracts governed by Florida law where there is no fallback provision or insufficient fallback language is provided. “Fallback provisions” refer to a term in a contract that sets forth a methodology or procedure for determining a benchmark replacement.
Like the FRB‑selected benchmark described by the Act, HB925 provides that the recommended benchmark replacement used for LIBOR contracts in Florida after LIBOR’s discontinuation is based on SOFR and includes recommended spread adjustments. The Florida Bill also sets forth the events that will trigger the replacement of LIBOR, and specifies that if a recommended benchmark replacement becomes the benchmark replacement for any contract, security, or instrument, then all applicable benchmark replacement conforming changes must become an integral part of such contract, security, or instrument by operation of law. Additionally, HB925 provides that the selection or use of a recommended benchmark replacement for a contract, security, or instrument constitutes a commercially reasonable replacement for, and a commercially substantial equivalent to, LIBOR, and that a person is not liable for damages, and is not subject to any claim or request for equitable relief, in connection with the selection or use of a recommended benchmark replacement.
The Florida Bill’s provisions resemble recently-enacted legislation in Indiana and Tennessee which WBK reported on here.
