HB475 Alabama 2021 Session

Summary

Primary Sponsor

Danny GarrettRepresentative

Republican

Session

Regular Session 2021

Title

Financial transactions, contingencies provided if the London Interbank Offered Rate is discontinued, Secs. 5-28-1 to 5-28-5, inclusive, added

Summary

Alabama HB475 would create a LIBOR Discontinuance and Replacement Act to guide how contracts transition from LIBOR to a replacement benchmark and protect parties from breach claims.

What This Bill Does

HB475 adds a new LIBOR Discontinuance and Replacement Act that applies to all contracts, securities, and instruments. It prohibits parties from refusing to perform or declaring breach solely because LIBOR ends or a replacement benchmark is used. It designates a 'determining person' to select a replacement benchmark (such as Term SOFR or SOFR) and to implement necessary conforming changes, with the replacement becoming the contract's benchmark by operation of law on the LIBOR replacement date under specified conditions. It also provides a safe harbor from lawsuits for using the recommended replacement and ensures changes are treated as continuity rather than contract amendments, with no required notice or consent and no taxable event merely from the transition.

Who It Affects

• Contracting parties to contracts, securities, or instruments that reference LIBOR (such as borrowers, lenders, lessees, investors) would be protected from breach or non-performance claims due to LIBOR discontinuance and must accept the replacement benchmark when applicable.
• Entities that determine and implement the benchmark replacement (the determining person and relevant recommending bodies) would have authority to select the replacement and apply conforming changes, with safe-harbor protections.

Key Provisions

• Establishes the LIBOR Discontinuance and Replacement Act of 2021 as Chapter 28 in Title 5 of the Alabama Code.
• Prohibits refusing performance or declaring breach solely because LIBOR is discontinued or replaced with a benchmark index.
• Defines key terms including benchmark, benchmark replacement, benchmark replacement conforming changes, determining person, LIBOR discontinuance event, LIBOR replacement date, and recommended benchmark replacements such as Term SOFR or SOFR.
• Applies to all contracts, securities, and instruments including commercial transactions, and is not displaced by other Alabama law.
• On the LIBOR replacement date, the selected benchmark replacement becomes the contract’s benchmark by operation of law for contracts meeting certain fallback conditions, without notice or consent.
• After LIBOR discontinuance, LIBOR-based fallback quotes and polls are disregarded as void.
• A determining person may irrevocably elect the recommended benchmark replacement (by the LIBOR replacement date or contract deadline) to become the benchmark for determinations occurring after the replacement date.
• If a replacement becomes the benchmark, applicable benchmark replacement conforming changes automatically become part of the contract.
• The act provides a safe harbor from liability and treats the replacement as commercially reasonable, not an amendment, and ensures no disruption of rights or taxable events; GAAP compliance is recognized.
• Effective immediately upon the Governor's signature.

AI-generated summary using openai/gpt-5-nano on Feb 22, 2026. May contain errors — refer to the official bill text for accuracy.

Subjects

Financial Institutions