Public consultation on the NWG’s recommendation on the rules and methods of conversion of legacy issues of WIBOR-based debt instruments

The National Working Group (NWG) for the benchmark reform has launched a new consultation entitled „Draft Recommendation on the rules and methods of conversion of legacy issues of WIBOR-based debt instruments“. In it, the Group is consulting on a proposed approach towards the dealing with debt instruments whose interest rates are in any way tied to WIBOR, the Warsaw Interbank Offered Rate, which is expected to be terminated at the end of 2024.
Specifically, the Group proposes the following approach when analyzing existing debt instruments:
– First, issuers shall conduct a review of all outstanding or held debt instruments to see which ones are tied to WIBOR and, if so, which ones have fall-back provisions in the event WIBOR is to be terminated.
– In case fall-back provisions are provided, the issuer shall ascertain that the fall-back rate is a risk free rate designated under Article 23c of the Benchmark Regulation (BMR).
– In case no fall-back provisions are provided or the fall-back rate is NOT a designated risk free rate under Article 23c of the BMR, the issuer must take appropriate steps, such as the premature redemption of the debt instrument or the adoption of corresponding fall-back provisions by resolution of a bondholder meeting,
– In latter case or for the issuance of any NEW debt instrument, the replacement rate shall be the WIRON compound rate with the 5-Business-Day Lookback „with Observation Period Shift“.
#### Below graphic depicts the analysis that must be performed by debt issuers:
Graphic 1 – Analysis of outstanding Debt Instruments

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Also enclosed in the consultation paper is the findings from a survey among issuers as to the fall-back clauses contained in active issues of securities.