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New Global Note structure for international bearer debt securities issued through the ICSDs 1 June 2006

New Global Note structure for international bearer debt securities issued through the ICSDs 1 June 2006. The international debt market New Global Note Legal framework Market impacts Additional information. International debt market Key features.

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New Global Note structure for international bearer debt securities issued through the ICSDs 1 June 2006

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  1. New Global Note structureforinternational bearer debt securitiesissued through the ICSDs 1 June 2006

  2. The international debt market • New Global Note • Legal framework • Market impacts • Additional information

  3. International debt marketKey features The international debt market features instruments that are initially issued (and subsequently traded) across borders and has the following features: • Wide range of issuers • Different jurisdictions • Deposited with ICSDs • Multi-currency • Multi-product • Can be offered simultaneously to investors in a number of countries • Often stock exchange listed (although the bulk of trading is over-the-counter)

  4. International debt market Attractiveness of international debt securities Data source: www.bis.org • Key features: • Accessibility • Price • Liquidity

  5. International debt marketEurosystem collateral eligibility • Eurosystem: the ECB and the National Central Banks of member states which have adopted the single currency • Principal objectives of the Eurosystem are price stability and support of the general economic policies of the European Community • Eurosystem uses monetary policy instruments to help steer interest rates and manage liquidity • Liquidity provided to the market via monetary policy instruments usually requires the placement of “eligible collateral” • More information on www.ecb.int

  6. International debt marketEurosystem collateral eligibility Eurosystem collateral eligibility criteria (amongst other requirements): • euro-denominated • debt • issued by an EEA , G10 or supranational issuer • meets high credit standards • is listed or quoted on a regulated market or an approved non regulated market • is settled in the Eurozone • is held with a Securities Settlement System (SSS) complying with further Eurosystem criteria • More information on http://www.ecb.int/pub/pdf/other/gendoc2005en.pdf

  7. The International debt market • New Global Note • Legal framework • Market impacts • Additional information

  8. New Global NoteClassical Global note (CGN) Structure International securities issued in CGN form I C S D C l i e n t s I s s u e r Euroclear Common Depositary Agreement Issuing & Paying Agency Agreement Terms & Conditions / Operating Procedures / Customer Handbook Issuer Agent Common Depositary Clearstream

  9. New Global NoteTrigger of the new structure • Request from Eurosystem leads to the proposal of a new structure for securities to be recognised as eligible collateral • The new structure will be mandatory for Eurosystem collateral eligible securities as of 1 January 2007 • The NGN structure can also be used at issuer’s choice for other bearer debt securities

  10. New Global NoteNew structure International securities issued in NGN form Issuer - ICSD Agreement Euroclear Euroclear Issuing & Paying Issuing & Paying CSK CSK Agency Agency I I Agreement Agreement Agreement Agreement C C I I S S Terms & Conditions / Terms & Conditions / CSK CSK s s D D Operating Operating s s Issuer Issuer procedures / procedures / u u C C Agent Agent Customer handbook Customer handbook e e l l r r i i CSP CSP e e n n t t CSP CSP s s Agreement Agreement Clearstream Clearstream Issuer Issuer - - ICSD Agreement ICSD Agreement

  11. New Global NoteKey features • Bearer form securities • New type of global certificate: New Global Note (NGN) • Issue Outstanding Amount (IOA) = ICSDs’ records • No need for physical annotation of the Global Note • Issuer-ICSD agreement • Two new types of agents: • Common Safekeeper (CSK): commercial banks or ICSDs • Common Service Provider (CSP): commercial banks

  12. New Global NoteOverview of the dual structure

  13. New Global NoteCollateral eligibility As from 1 January 2007 collateral eligible international debt securities in bearer form will have to comply with: • The current collateral eligibility criteria, AND • New criteria: • NGN form • Kept in safe custody with an ICSD CSK Grandfathering will apply for securities issued before 1 January 2007

  14. 30 Jun 1 Jan New Global NoteCollateral eligibility for securities issued through the ICSDs As from 1 January 2007, Eurosystem collateral eligibility = current Eurosystem criteria + NGN form + ICSD CSK

  15. The International debt market • New Global Note • Legal framework • Market impacts • Additional information

  16. Legal frameworkPrinciples New or updated legal documents: • New Global Note (NGN) • Effectuation authorisation • Issuer-ICSD Agreement • Legal Opinions for four jurisdictions: England, Germany, Netherlands, New York • Model provisions for offering documentation • Standard clauses for Trust Deeds / Issuing and Paying Agent Agreements

  17. The International debt market • New Global Note • Legal framework • Market impacts • Additional information

  18. Market ImpactsGeneric • New operational flows had to be designed for the NGN structure when necessary • Changes led to optimisation of the operational flows • Harmonisation of the current and new flows • Standard Market Protocol to promote the changes to the market

  19. € € € € Common Service Provider Market impactsIssuance process Issuer Common Safekeeper Positioning Confirm receipt and validity of the NGN Euroclear Lead Manager NI Account Mark Up Instruction Syndicate/ Allottees Clearstream Confirm Mark Up + Instruction to credit LM account CS358F CS358F

  20. Market ImpactsImpact for issuers • Specific form of security (NGN) deposited with a CSK • Updated offering documentation • Issuer-ICSD Agreement • Legal opinion on validity and enforceability of NGN (except in four markets covered by WG opinions) • Effectuation authorisation

  21. Market ImpactsImpact for issuer agents and lead managers For issuer agents and lead managers: • Specific form of security NGN • New issue documentation • New procedure for New Issue issuance process. For issuer agents only: • New procedures/systems for reconciliation • Enhanced procedures for Income and Corporate Actions processing • New responsibilities created by the Issuer-ICSD Agreement

  22. Market ImpactsImpact for investors • Eurosystem-eligibility maintained • Communication of new criteria • Improved asset servicing

  23. The International debt market • New Global Note • Legal framework • Market impacts • Additional information

  24. Additional informationProject organisation • Working Group • Market Advisory Group

  25. Additional informationDocuments covering the NGN structure • NGN brochure • FAQ • Legal pack including: • NGN templates • standard provisions for agency agreements • standard provisions for offering documentation • Issuer-ICSD agreement • Effectuation authorisation • Operating & Administrative Procedures Memorandum • NGN New Issues Procedures

  26. Additional informationWhere to obtain additional information

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