AAA-rated BNG Bank issues via capital markets industry utility eppf world’s first “Smart n-bond” arranged by DZ BANK
Luxembourg, The Hague, Frankfurt am Main – 13 June 2019 – BNG Bank NV, the triple AAA rated publicly owned Dutch bank (BBG: BNG), has issued via the european primary placement facility (eppf) S.A. (BBG: eppfsa), a straight-through-processing industry utility for bonds and other issuances, the first ever German law registered bond (Namensschuldverschreibung or NSV, commonly called n-bond in English) that has been settled via Clearstream Banking AG on TARGET2-Securities (ISIN: DE000A2R1W85). The trade was arranged by DZ BANK. The EUR 10m cleared n-bond was issued as a private placement with a maturity of three years and a coupon of 0.05 %. Bank of New York Mellon acted as paying agent and registrar.
NSVs are German law instruments. Under German accounting standards investors do not require a mark-to-market valuation. These two features make the NSV and the Schuldschein attractive investments for German institutional investors. However, the requirement of a physical paper exchange for settlement was an important obstacle for an internationalisation of these products. Between now and the 1980s little has changed in the administration of these German Law registered bond investment products. Today we have reached a turning point. By means of the eppf technology, the settlement of n-bonds can now be executed using existing bearer bond infrastructure, opening up the instrument for a much large investor universe.
The Smart n-bond issued today for BNG Bank has been developed by eppf with early stage involvement of Clearstream Banking AG and opens a completely new chapter. For the first time, n-bonds can be settled and transferred without sending paper certificates to investors. Cleared n-bonds issued via eppf receive an ISIN code and are treated as any other security via the clearing system using the European Central Bank’s TARGET2-Securities system. Investors will, therefore, not need to provision for a separate paying agency function for n-bonds anymore. In this way, also non-German investors will be able to invest into this product, opening up the market for n-bonds internationally. Cleared n-bonds via eppf do also count with majority provisions for noteholder meetings and do not include any hidden call-rights, doing away with two of the largest draw-backs of their Schuldschein sister. Issuers will now be able to approach not only typical German Schuldschein / n-bond investors but also international investors with the same financial instrument. That said, cleared n-bonds will not be listed and retain a high denomination.
All other advantages that eppf offers for regular bonds are also available for cleared NSVs. These are
- a standardised yet flexible always up-to-date documentation (Single European Debt Issuance Programme),
- a central API with fully machine-readable data and documents,
- near real-time issuance,
- reduction of set-up and maintenance costs for bond issuance of up to 80% for issuers,
- an extensive network of high-quality partners and, most importantly,
- straight-through processing throughout the entire bond issuance value chain
(for further details on the eppf mechanics, please see “About eppf” below).
Robert Koller, Executive Chairman of eppf, said: “We are very pleased and honoured to be working with such an important institution in the global issuer landscape as is BNG Bank for our most recent product, the Smart n-bond. Not only does this show the general capabilities of eppf as a turnkey, straight-through-processing, near real-time industry utility but it also shows the strength of our innovative thinking and partner ecosystem. eppf is on a mission to implement the biggest change to the way bonds are being issued since the introduction of the electronic clearing system. With a pipeline of deals that range from plain corporate issuance, to infrastructure finance, to green bonds to public sector issuance, for small and large issuers alike, we are looking very positively into the future and will continue to innovate and to be the bond platform of reference.”
Peter Nijsse MD Treasury/Capital Markets at BNG Bank: „At BNG Bank we welcome innovative initiatives aiming to improve primary market infrastructure and we are therefore participating in several projects to improve and modernize the flow of funds from investors to issuers. We are proud to be the first issuer of a ‘cleared NSV’ in eppf. With this new investment product, BNG Bank is seeking to support innovation in the primary market for NSVs. By testing investor demand for this new way of NSV issuance we also hope to access a wider pool of investors in BNG Bank fixed income products. Together with eppf, DZ Bank, Clearstream and Simmons & Simmons we have now shown that an efficient, fully digital, straight-through-processed flow of funds from investors to issuers is achievable. We hope that this will not only contribute to the growth and accessibility of the Schuldschein/NSV market, but we also hope that this will be an example for innovation in other segments of the fixed income market.“
H.E. Mr. Pierre Gramegna, Finance Minister of the Grand Duchy of Luxembourg, stated: „Luxembourg has a long tradition of pioneering in international capital markets, specifically in the area of debt instruments: From the listing of the world’s first Eurobond to the world’s first green bond. The issuance of the first smart n-bond, made possible by Luxembourg-based bond issuance platform eppf, is another illustration of this innovative spirit. In order to achieve the ambitions of the Capital Markets Union to provide broader and easier access to finance for start-ups and SMEs across national borders, Europe indeed needs private sector firms that are ready to develop and bring new solutions to the market.”
Wolfgang Koehler, CFA, Board Member for capital markets at DZ BANK, commented: “It is important to us at DZ BANK to support industry initiatives that deliver solutions. We found in BNG and eppf two partners that share our vision of further streamlining capital markets processes that not only bring down the cost base, but also open markets across Europe. We thereby generate new value propositions to issuers and investors on a truly European footing. eppf is an example of how existing financial technology can be adapted to create value. The regulatory approach in Luxembourg in combination with the ECB’s T2S System and Clearstream Banking AG are important facilitators behind the first ever cleared n-bond issued for BNG today. This shows that by combining existing technology with new approaches, we can arrive at novel and creative solutions. We are committed to continuously deliver on the combination of Legal Tech / Reg Tech, FinTech and RiskTech to improve DZ BANK’s services to our partners and clients.”
Berthold Kracke, CEO of Clearstream Banking AG, stated: “The settlement of cleared NSVs via the electronic settlement platform TARGET2-Securities marks an important step towards market digitisation and internationalisation. Clearstream supports innovative types of securitisation, especially when they increase fungibility and security of assets for investors by using established and efficient market infrastructures. In times of low interest rates, an increase of investment options in the German market is generally valuable.”
Louis-Maël Cogis, Partner and Country Head at Simmons & Simmons Luxembourg, commented on advising eppf: “eppf has taken a very ambitious path with the objective to dramatically change the way bonds are being issued and deals are being done in the capital market world. We are proud to be able to help eppf in that respect and the transaction with BNG Bank is a very important milestone on that path.”
Karsten Woeckener, Partner in the corporate finance practice of White & Case in Frankfurt, commented the collaboration with eppf as follows: “This transaction represents a further and important step in the digitization of capital market-relevant processes and products. eppf's latest product is another example of the advantages of this development: These types of products and the combination of digitization is becoming increasingly attractive for international investors and issuers for various reasons. I expect that this herald a wave of interest from other market participants. My team and I are pleased to have acted in an advisory capacity.”
eppf S.A. is a securitisation company incorporated under the laws of the Grand Duchy of Luxembourg and supervised by the Luxembourg regulator (the Comission de Surveillance du Secteur Financier, the CSSF).
eppf complies with the key principles of the Capital Markets Union and is the only capital-markets-as-a-service (CMaaS) platform of its kind. It offers a turnkey, straight-through-processing, near real-time solution for borrowers, whether corporates, public-sector entities or others allowing for the issue of bonds using its innovative and flexible structure of a ring-fenced Luxembourg compartment company. eppf sets a new standard for bond issuance in Europe and worldwide creating a truly integrated, borderless, frictionless and fully fungible debt market.
eppf is an independent financial platform, bringing harmonisation and standardisation to bond markets without losing flexibility, through digitalising and automating processes and stringent quality controls. eppf provides enormous cost and time savings to all stakeholders bringing time-to-market for first-time issuers down to as little as a few weeks and in the case of repeat issuers to a settlement target of T+1. The eppf platform builds on existing and proven mechanisms, allowing clients to maintain their current banking relationships. It has been developed with the participation from market stakeholders from a number of different countries, including major investment banks, investors, advisers, issuers and various regulators.
With the assistance from a broad panel of market participants, eppf has developed standard documentation (the Single European Debt Issuance Programme) flexible enough to suit most debt issuers. Each security issued via eppf complies with the new standard of the Single European Debt Security. eppf integrates all steps for issuing debt securities, mapping the entire value chain of a bond issuance for the first time in a fully digital and automated environment. In addition to cost savings and reduced time-to-market for market participants, created by the common use of eppf as an industry utility, eppf offers two innovative pricing models, new in capital markets. For the occasional borrower eppf provides a Pay-As-You-Print model where costs only occur when an issuance actually happens. For frequent issuers, eppf offers the ability to reduce costs per bond further through an annual subscription covering all issuances during the year.
The eppf platform benefits investors through increased liquidity, quality controls, standardised documentation and a central data hub allowing them to analyse their investments in an ongoing way, never previously available for bond market investors.
eppf's core team is made up of experienced senior financial professionals from the financial, banking, IT and legal sector with over 200 years experience between them in major international investment banks and law firms and with more than 100bn EUR in combined issuance.
For further information, visit www.eppf.eu
About BNG Bank NV
BNG Bank serves the Dutch public sector as a principal lender to local authorities in the Netherlands. BNG Bank is fully owned by the Dutch government (50% central, 50% local government). BNG Bank’s clients are municipalities, public sector housing associations, healthcare and educational institutions and public utilities. BNG Bank provides customized financial services ranging from loans and funds transfers to electronic banking . Debt securities issued by BNG Bank are rated AAA by Standard & Poor's, Aaa by Moody's and AAA by Fitch.
Please visit us at www.bngbank.com.
About DZ BANK
DZ BANK is the second largest bank in Germany. It is the central institution in the cooperative financial network and serves around 850 cooperative banks. As “DZ BANK. Die Initiativbank”, it is also active as a corporate bank and is the holding company for the specialised service providers in the DZ BANK Group: Bausparkasse Schwäbisch Hall (building society), DZ HYP (real estate and public sector financing), DZ PRIVATBANK, R+V Versicherung (insurance company), TeamBank (consumer finance), Union Investment Group (asset management), VR Smart Finanz and various other specialised institutions. With its extensive range of financial products and services, the DZ BANK Group supports the local cooperative banks - and their 10,500 branch offices - in Retail Banking, Corporate Banking, Capital Markets and Transaction Banking. The Volksbanken Raiffeisenbanken Cooperative Financial Network has more than 30 million customers in Germany. 18.6 million are also members and therefore shareholders of their bank. (www.dzbank.de)
As an international central securities depository (ICSD) headquartered in Luxembourg, Clearstream, a part of Deutsche Börse Group, provides the post-trade infrastructure for the Eurobond market and services for securities from 58 domestic markets worldwide. With EUR 14 trillion in assets under custody, Clearstream is one of the world’s largest settlement and custody firms for domestic and international securities.
About Simmons & Simmons
Simmons & Simmons is a leading international law firm with fully integrated teams working through offices in Europe, the Middle East and Asia, bringing experienced professionals to some of the most active growth markets today. Our focus on a small number of sectors means we are able to understand and respond to our clients’ needs. Our industry sectors are: Asset Management & Investment Funds, Financial Institutions, Life Sciences and Telecoms, Media & Technology (TMT). We also focus on the E&I market, in particular through our international projects and construction teams. We have a track record for innovation and delivering value to clients through new ways of working (http://www.simmons-simmons.com/en/contact-us/luxembourg).
About White & Case
White & Case LLP is a leading global law firm with 44 offices in 30 countries, in markets that matter today. About 200 lawyers, tax advisers and notaries in Berlin, Düsseldorf, Frankfurt am Main and Hamburg operate in Germany (www.whitecase.com).
About BNY Mellon
BNY Mellon is a global investments company dedicated to helping its clients manage and service their financial assets throughout the investment lifecycle. Whether providing financial services for institutions, corporations or individual investors, BNY Mellon delivers informed investment management and investment services in 35 countries. As of March 31, 2019, BNY Mellon had $34.5 trillion in assets under custody and/or administration, and $1.8 trillion in assets under management. BNY Mellon can act as a single point of contact for clients looking to create, trade, hold, manage, service, distribute or restructure investments. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). Additional information is available on www.bnymellon.com. Follow us on Twitter @BNYMellon or visit our newsroom at www.bnymellon.com/newsroom for the latest company news.
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