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In his 2022 fiscal year executive budget proposal legislation (part PP, at p. 233), New York Governor Andrew Cuomo included provisions to aid in the transition from LIBOR.
Article 18-C ("LIBOR Discontinuance") is designed to protect contracts that reference LIBOR after that benchmark is discontinued. For contracts that are silent on how to treat the discontinuance, or that fall back to another LIBOR-based rate, the legislation would mandate the use of a replacement benchmark recommended by the Federal Reserve Board, the Federal Reserve Bank of New York or the Alternative Reference Rates Committee ("ARRC"). Where a contract authorizes a party to choose a replacement, the legislation would grant a safe harbor for choosing the recommended replacement benchmark.
The inclusion of the provision follows a request letter from members of the ARRC and other market participants to Governor Cuomo, as well as the New York State Senate Majority Leader and Assembly Speaker, to support the adoption of an ARRC-drafted legislative proposal intended to help facilitate the transition from LIBOR (see previous coverage).
Note: Cadwalader serves as counsel to the ARRC and helped draft the proposed legislation.
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