The first Luxembourg government bond has been issued through LuxCSD, the domestic CSD. Banque Internationale à Luxembourg (BIL) was appointed as principal paying agent in its collaboration with the CSD.
This bond, the government’s longest dated so far with a 15 year tenor, launched into the primary markets on March 19, 2013 and has raised €750 million. Its launch follows a book building exercise, which attracted interest from 73 investors from eight different countries.
BIL’s role in the issuance process was to oversee the flow of securities and standardized communications between the issuer and the joint-lead managers and investors. BIL also assisted LuxCSD in handling the delivery against payment transaction in the financial systems.
The first Eurobond was launched in 1963, with BIL serving as listing agent. The bond, issued by Italian highway construction company Autostrade, was listed on the Luxembourg Stock Exchange.
The latest bond issue follows the approval given by the European Central Bank to LuxCSD to use securities in Eurosystem credit operations. With this approval, a security can be created on LuxCSD’s books, delivered against payment to the leader of the banking syndicate and the issuer is paid the agreed amount being borrowed. LuxCSD then process the cash flows on accounts of a Eurozone central bank to ensure zero risk for the counterparties. “Previously there was no need for this before but given TARGET-2 Securities and the market evolution to use central bank money for securities settlement the need for infrastructure to provide that guaranteed process is important,” said Patrick Georg, general manager of LuxCSD.
LuxCSD is the national provider for issuance and primary distribution and a supplier of Euro central bank money settlement and custody services founded in 2010.