Bill Summary: HB 5394 - LIBOR Discontinuance and Replacement

• Establishes July 1, 2022 as the effective date for replacing one-week and two-month LIBOR tenors, and June 30, 2023 for all other LIBOR tenors, unless relevant recommending bodies determine earlier discontinuation dates.

• Mandates automatic replacement of LIBOR with the Secured Overnight Financing Rate (SOFR) by operation of law for contracts without fallback provisions or with fallback provisions based on LIBOR values.

• Voids any fallback provisions that rely on polls, surveys, or inquiries for interbank lending rates or LIBOR-based rates following the bill's effective date.

• Designates the Federal Reserve Board, Federal Reserve Bank of New York, and the Alternative Reference Rates Committee as "relevant recommending bodies" responsible for selecting benchmark replacements and spread adjustments.

• Provides legal protections by establishing that SOFR replacement constitutes a commercially reasonable equivalent to LIBOR and does not constitute a breach, modification, or grounds for termination of contracts.