Email a friend

• Your name: Please enter your name
• Your email: Please enter your email address Please enter a valid email

Please enter a maximum of 5 recipients. Use ; to separate more than one email address.

Luxembourg represents more than 40% of all international bonds listed in Europe

Since the very early years of the rise of the international debt securities market, the LuxSE has acted as a forerunner to the post-crisis revival of the high yield market and continues diversifying its products and services to respond to new market needs.

In Europe, the financial crisis recovery resulted in the continuation of bank deleveraging. In view of the implementation of the Basel III rules, banks will keep on cutting their balance sheet and corporate lending will continue to drop.

In this context, the high yield market will still flourish as the trend of moving from loan to bond financing (and particularly loan-to-bond refinancing operations) is sustained. Consequently, Luxembourg, with its robust legal and regulatory framework and wide range of issuing vehicles, offers plenty of advantages to both issuers and investors, who will see it as a premium listing location.

REGULATORY ENVIRONMENT AND GOVERNING LAW

With the boom of high yield activity over recent years as a source of financing for European corporates, Luxembourg ranks as an undisputable leading listing centre in this market.

Considering that the LuxSE is the largest stock exchange in Europe in terms of listed international bonds, it is also the favourite listing market for European issuers of high yield bonds. Through its innovative products and services, the LuxSE has proven to meet the needs of international issuers who commonly use Luxembourg to structure holding and financing companies.

The LuxSE operates two markets: a European-regulated market called the Bourse de Luxembourg. which offers a European passport for securities, and an exchange-regulated market called the Euro MTF.

For the most part, high yield bonds are listed on the Euro MTF market in order to have the offering memorandum approved by the LuxSE in accordance with the Stock Exchange Rules and Regulations.

Otherwise, the offering memorandum must be approved as a prospectus by the Luxembourg Financial Regulator (Comission de Surveillance du Secteur Financier – the CSSF) under the requirements of the EU Prospectus Directive.

In Luxembourg, the vast majority of high yield notes are governed by New York law.

Under Luxembourg law, there are no specific limitations or requirements when choosing New York law or English law for the indenture governing an issuance of high yield notes, the purchase agreement, the intercreditor, or guarantees.

PUBLIC AND PRIVATE OFFERINGS

Luxembourg public offerings and private placing of high yield notes are not governed by the same provisions and so are subject to different registration and timing review processes.

The registration and filing process of any public offerings of high yield notes under Luxembourg law is subject to the law of July 10 2005 on prospectuses for securities, as amended (Prospectus Law).

In relation to the filing process, the issuer needs to prepare and submit a prospectus to be approved by the CSSF, together with an information document (entry form). If the documents are complete, and no supplementary information is needed, the CSSF will notify the prospectus’s approval within 10 working days from its submission. The approval timeframe is extended to 20 working days if the public offer involves securities issued by an issuer who still has no securities admitted to trading on a regulated market and has not previously offered securities to the public.

Once the prospectus is approved, the issuer should file it with the CSSF and render it public as soon as possible. In any case, this should be done at a reasonable time in advance of (and at the latest at the beginning of) the offering to the public of the securities involved. In practice, the prospectus tends to be published on the very day (or on the following day) of its approval by means of a publication on the LuxSE website. If the notes are intended to be listed on the LuxSE, the issuer may file an application with the LuxSE as soon as a first draft prospectus is submitted to the CSSF. However, in any case, offerings may not commence before the prospectus’s publication.

With respect to publicity restrictions, according to the Prospectus Law, the information contained in a public offering advertisement should: (i) not be inaccurate or misleading; and, (ii) be consistent with the information contained in the prospectus, if already published, or with the information required to be in the prospectus, if it is published afterwards.

For restrictions related to the issuance of research reports, the provisions of the Law of May 9 2006 on market abuse, as amended, should apply.

As mentioned, the private placing of high yield notes is not subject to the provisions of the Prospectus Law. In practice, high yield notes are generally admitted to trading on the Euro MTF market of the LuxSE, which is an exchange regulated market not included in the European Commission list of regulated markets.

When high yield notes are listed on the Euro MTF, the LuxSE Rules and Regulations govern such admission to trading. In addition, the LuxSE is the competent entity that approves the prospectus before admitting the notes to trading.

The issuer must submit its prospectus for approval to the LuxSE with an application for trading the notes on the Euro MTF and the required supporting documents (such as articles of incorporation and the annual reports for the past three years of the issuer and guarantors, if any).

The LuxSE usually notifies its decision regarding the approval of the draft prospectus within five days of its submission. Upon the LuxSE’s approval of the prospectus, the notes will be listed on the official list of the LuxSE and admission to trading will follow. After listing, the issuer will be subject to continuing obligations, including: (i) the communication of any event affecting the notes admitted to trading or any material change in the situation of the issuer; and, (ii) financial reporting.

INTERCREDITOR ISSUES

When the note is secured, high yield creditors usually benefit from junior ranking security over shares, bank account and receivables, which are governed by the Luxembourg law of August 5 2005 on financial collateral arrangements (Collateral Law). The ranking of the pledges are determined by the date such pledges are perfected and become opposable to third parties.