House Financial Services Committee Advances LIBOR Act

The U.S. House Committee on Financial Services voted to advance H.R. 4616 (including a technical amendment), the "Adjustable Interest Rate (LIBOR) Act of 2021," which would establish a process for replacing LIBOR with the Secured Overnight Financing Rate ("SOFR") in financial contracts that do not contain sufficient fallback provisions upon the cessation of LIBOR. The Act would (i) direct the Federal Reserve Board ("FRB") to issue rulemakings necessary to adjust SOFR for each category of LIBOR contract and (ii) preclude litigation related to existing contracts that lack a defined replacement benchmark rate.

The Act builds on similar laws enacted in New York and Alabama to provide uniform treatment of LIBOR contracts nationwide. As a Federal law, the Act would also amend a provision of the Trust Indenture Act of 1939 that could otherwise prohibit changes to certain securities and clarifies the tax treatment of contracts where LIBOR is replaced by SOFR. The Act does