The Luxembourg Stock Exchange (LuxSE) and the European Stability Mechanism (ESM) gathered around the bell on Friday to celebrate the listing of ESM’s first bond governed by Luxembourgish law.
In September 2019, the ESM announced that it would stop issuing euro-denominated bonds governed by English law and switch to Luxembourgish law for its euro bonds, starting from 1 October 2019. ESM’s first bond issuance under the new regime was a five-year bond raising €3.5 billion, which was listed on LuxSE on 29 October. The 0% coupon bond was oversubscribed with orders exceeding €6.4 billion and completed ESM’s fourth quarter funding needs.
Klaus Regling, Managing Director of the ESM, explained: “As a Luxembourg-based institution, the ESM decided to begin using Luxembourgish law as the governing law for all its new euro-denominated bonds and bills since October. We have seen support from banks and investors for this move. It is a concrete way to both underpin, and show the strength of, the European capital markets union. The ESM is delighted to participate in this bell ceremony at the Luxembourg Stock Exchange where our bonds are listed”.
The ESM has listed its bonds on LuxSE since 2012. Over the past seven years, the ESM has raised close to €160 billion to help euro area countries in severe financial distress. In 2019 alone, the ESM has issued bonds totalling €9.8 billion, making the ESM one of the most important issuers of euro-denominated bonds in the Eurozone. Going forward, all ESM euro-denominated bonds will be governed by Luxembourgish law.
At the ceremony, Luxembourg's Minister of Finance, Pierre Gramegna, commented: “As the host country of the ESM, Luxembourg has played a supportive role in the establishment and the development of the institution, and, by extension, to the strengthening of the Euro Area. I welcome the issuance of the first ESM bond under Luxembourg law, which is not only an important step in the common history shared by Luxembourg and the ESM, but more importantly a strong sign that the Euro Area stands united and is ready for future challenges”.