N.Y. General Obligations Law 18-401 – Effect of LIBOR discontinuance on agreements
§ 18-401. Effect of LIBOR discontinuance on agreements. 1. On the LIBOR replacement date, the recommended benchmark replacement shall, by operation of law, be the benchmark replacement for any contract, security or instrument that uses LIBOR as a benchmark and:
Terms Used In N.Y. General Obligations Law 18-401
- Benchmark: shall mean an index of interest rates or dividend rates that is used, in whole or in part, as the basis of or as a reference for calculating or determining any valuation, payment or other measurement under or in respect of a contract, security or instrument. See N.Y. General Obligations Law 18-400
- Benchmark replacement: shall mean a benchmark, or an interest rate or dividend rate (which may or may not be based in whole or in part on a prior setting of LIBOR), to replace LIBOR or any interest rate or dividend rate based on LIBOR, whether on a temporary, permanent or indefinite basis, under or in respect of a contract, security or instrument. See N.Y. General Obligations Law 18-400
- Benchmark replacement conforming changes: shall mean , with respect to any type of contract, security or instrument, any technical, administrative or operational changes, alterations or modifications that are associated with and reasonably necessary to the use, adoption, calculation or implementation of a recommended benchmark replacement and that:
a. See N.Y. General Obligations Law 18-400 - Contract: A legal written agreement that becomes binding when signed.
- Determining person: shall mean , with respect to any contract, security or instrument, in the following order of priority:
a. See N.Y. General Obligations Law 18-400 - Fallback provisions: shall mean terms in a contract, security or instrument that set forth a methodology or procedure for determining a benchmark replacement, including any terms relating to the date on which the benchmark replacement becomes effective, without regard to whether a benchmark replacement can be determined in accordance with such methodology or procedure. See N.Y. General Obligations Law 18-400
- Interest rate: The amount paid by a borrower to a lender in exchange for the use of the lender's money for a certain period of time. Interest is paid on loans or on debt instruments, such as notes or bonds, either at regular intervals or as part of a lump sum payment when the issue matures. Source: OCC
- LIBOR: shall mean , for purposes of the application of this article to any particular contract, security or instrument, U. See N.Y. General Obligations Law 18-400
- LIBOR discontinuance event: shall mean the earliest to occur of any of the following:
a. See N.Y. General Obligations Law 18-400 - LIBOR replacement date: shall mean :
a. See N.Y. General Obligations Law 18-400 - Recommended benchmark replacement: shall mean , with respect to any particular type of contract, security or instrument, a benchmark replacement based on SOFR, which shall include any recommended spread adjustment and any benchmark replacement conforming changes, that shall have been selected or recommended by a relevant recommending body with respect to such type of contract, security or instrument. See N.Y. General Obligations Law 18-400
- Uniform Commercial Code: A set of statutes enacted by the various states to provide consistency among the states' commercial laws. It includes negotiable instruments, sales, stock transfers, trust and warehouse receipts, and bills of lading. Source: OCC
a. contains no fallback provisions; or
b. contains fallback provisions that result in a benchmark replacement, other than a recommended benchmark replacement, that is based in any way on any LIBOR value.
2. Following the occurrence of a LIBOR discontinuance event, any fallback provisions in a contract, security, or instrument that provide for a benchmark replacement based on or otherwise involving a poll, survey or inquiries for quotes or information concerning interbank lending rates or any interest rate or dividend rate based on LIBOR shall be disregarded as if not included in such contract, security or instrument and shall be deemed null and void and without any force or effect.
3. This subdivision shall apply to any contract, security, or instrument that uses LIBOR as a benchmark and contains fallback provisions that permit or require the selection of a benchmark replacement that is:
a. based in any way on any LIBOR value; or
b. the substantive equivalent of paragraph a, b or c of subdivision one of section 18-402 of this article.
A determining person shall have the authority under this article, but shall not be required, to select on or after the occurrence of a LIBOR discontinuance event the recommended benchmark replacement as the benchmark replacement. Such selection of the recommended benchmark replacement shall be:
(i) irrevocable;
(ii) made by the earlier of either the LIBOR replacement date, or the latest date for selecting a benchmark replacement according to such contract, security, or instrument; and
(iii) used in any determinations of the benchmark under or with respect to such contract, security or instrument occurring on and after the LIBOR replacement date.
4. If a recommended benchmark replacement becomes the benchmark replacement for any contract, security, or instrument pursuant to subdivision one or subdivision three of this section, then all benchmark replacement conforming changes that are applicable (in accordance with the definition of benchmark replacement conforming changes) to such recommended benchmark replacement shall become an integral part of such contract, security, or instrument by operation of law.
5. The provisions of this article shall not alter or impair:
a. any written agreement by all requisite parties that, retrospectively or prospectively, a contract, security, or instrument shall not be subject to this article without necessarily referring specifically to this article. For purposes of this subdivision, "requisite parties" means all parties required to amend the terms and provisions of a contract, security, or instrument that would otherwise be altered or affected by this article;
b. any contract, security or instrument that contains fallback provisions that would result in a benchmark replacement that is not based on LIBOR, including, but not limited to, the prime rate or the federal funds rate, except that such contract, security or instrument shall be subject to subdivision two of this section;
c. any contract, security, or instrument subject to subdivision three of this section as to which a determining person does not elect to use a recommended benchmark replacement pursuant to subdivision three of this section or as to which a determining person elects to use a recommended benchmark replacement prior to the occurrence of a LIBOR discontinuance event, except that such contract, security, or instrument shall be subject to subdivision two of this section; or
d. the application to a recommended benchmark replacement of any cap, floor, modifier, or spread adjustment to which LIBOR had been subject pursuant to the terms of a contract, security, or instrument.
6. Notwithstanding the uniform commercial code or any other law of this state, this title shall apply to all contracts, securities and instruments, including contracts, with respect to commercial transactions, and shall not be deemed to be displaced by any other law of this state.