LuxCSD Issues First Dematerialized Security

LuxCSD has settled the first dematerialized security under a new law governing dematerialization, implemented in Luxembourg April 2013. The Climate Awareness Bond has a notional amount of €650 million and a 6-year tenor issued by the European Investment Bank (EIB), and was launched into the primary markets on July 11 with a settlement date of July 18.

LuxCSD handled the dematerialized issuance and delivery-versus-payment (DVP) settlement in Euro central bank money; joint bookrunners for the transaction were Bank of America Merrill Lynch, Crédit Agricole CIB, DZ BANK and UniCredit.

The issuance of dematerialized securities reduces inefficiencies, risks and costs for the industry. Because of direct access to central bank money which the EIB has in place, there is no risk that securities circulate in the market without the issuer receiving the payment of the borrowed amount. Luxembourg’s new law also allows issuers to receive information on the holders of their issued securities for more favorable treatment of electronic securities under foreign laws, e.g., for tax purposes.

Aldo M. Romani, Deputy Head of Funding – EUR at the EIB, said: “In addition to providing socially responsible investors with a new product of higher liquidity, this issue has successfully tested innovative issuance and settlement features with the ultimate goal to provide more value to investors as European market infrastructure improves: better operational efficiency, lower risk, shorter settlement cycle and lower transaction costs upon the establishment of TARGET2-Securities, the common technical platform that the Eurosystem is building for the seamless provision of borderless securities settlement services in Europe.”