The New York LIBOR Legislative Solution Now Officially Becomes a Law

The proposed New York "legislative solution" for the legacy and most renowned USD LIBOR contracts became Article 18-C of the New York General Obligations Law. The Article mainly aims at USD LIBOR contracts, loans, security, secularization, and mortgages with an ISDA definition proposed in the year 2006. The New York Law Organizations have stated that Article 18-C has no effect on USD LIBOR FRNS that have Alternative Reference Rate Committee's ("ARRC").

Meanwhile, the Article does not have any effect on non-USD LIBOR FRNS. Article 18-C confirms that the choice of SOFR to replace USD LIBOR under FRN terms, and it is a commercially reasonable substitute for USD LIBOR. This replacement is based on a methodology similar to LIBOR and substantial performance by any person of any right or obligation under such FRN.

The LIBOR administrator and the UK Financial Conduct Authority, the LIBOR regulator, have announced dates for the cessation of LIBOR. This will also have no impact on the legacy FRNS as the polling provisions would only be looked at once USD LIBOR ceases. Article 18-C would change the USD LIBOR provisions to the ARRC, which is recommended fallback provisions to SOFR.