The Asian Infrastructure Investment Bank (AIIB) has successfully issued its first digitally native note (DNN) on Euroclear’s Digital Financial Market Infrastructure (D-FMI). This marks the first digital issuance in USD for Euroclear. The initiative was supported by BMO Capital Markets as dealer and Citi, serving as dealer as well as the issuing and paying agent on the transaction.
The issuance, the first by an Asia-based issuer, was executed via Euroclear’s Digital Securities Issuance (D-SI) service, which enables the issuance, distribution and settlement of fully digital international securities on Distributed Ledger Technology (DLT). The DNN, boasting a triple-A rating by Moody’s, Standard & Poor’s and Fitch Ratings, successfully raised USD300 million to support AIIB’s sustainable development bond programme. The note is listed on the Luxembourg Stock Exchange. Citi acted as a dealer, as well as the issuing and paying agent, BMO Capital Markets as a dealer, and Euroclear Bank as the issuer central securities depository. Clearing of the bonds is also possible in the Hong Kong Monetary Authority’s Central Moneymarkets Unit (CMU) and the SIX Swiss Exchange (SIX). AIIB was advised on the transaction by Clifford Chance, and the dealers were advised by A&O Shearman.
This issuance demonstrates how the existing financial markets infrastructure can be used to broaden the adoption of digital securities.
In AIIB’s fifth year of being a bond issuer, this DNN issuance demonstrates that AIIB is committed to innovation in capital markets and to making settlements more efficient and faster. The Euroclear D-FMI platform is fully integrated into Euroclear’s traditional settlement system, ensuring investor and market maker access.
Philippe Laurensy, Managing Director and Head of Product, Strategy and Innovation commented: “As we continue our journey to becoming a digital, data-enabled Financial Market Infrastructure, this issuance signifies another important step forward. Together with our clients and the wider ecosystem, we will continue to embrace innovation and deliver robust technology solutions that can unlock new business opportunities and attract issuers and investors from across the globe.’’
AIIB Treasurer Domenico Nardelli said: “AIIB is proud to partner with Euroclear, Citi and BMO on this milestone transaction of many firsts. Not only is this the first USD digitally native note in Euroclear’s D-FMI, it is also the first time an issuer based in Asia has issued on the platform and the first DNN to be held in HKMA’s CMU. The success of this transaction proves Euroclear’s D-FMI allows for easy and broad adoption of digital bonds at scale, where market participants can buy and sell the bonds within their existing account structures. As a multilateral development bank financing Infrastructure for Tomorrow and with innovation in its DNA, AIIB sees this as an important opportunity to participate in the digitization of capital markets and help connect Asia and the world.”
Citi has supported AIIB on previous transactions and this marks the first time that Citi has worked with AIIB on the issuance of a digitally native note. Citi will continue to facilitate the issuance of digital bonds, unlocking the potential of digital assets for clients including efficient access to capital while paving the way for new operational models.
“This digitally native note issuance reflects the growing adoption of digital assets in financial markets. Citi is proud to be a key participant on this important benchmark. From execution and settlement to our work as issuing and paying agent, Citi’s roles leverage the power of the bank’s interconnected businesses to support clients through the full lifecycle of key transactions. Citi will continue to facilitate the issuance of digital bonds, unlocking the potential of digital assets for clients including efficient access to capital while paving the way for new operating models,” said Richard Zogheb, Head of Global Debt Capital Markets at Citi.
“BMO Capital Markets was delighted to be involved in this milestone transaction for AIIB, in partnership with Citi and Euroclear. Digitalization is high on the agendas of issuers, investors and banks as the financial industry strives to increase efficiency and resilience,” said Summer Hinton, Head of Global Markets International. “Here at BMO, digital is how we operate and we are pleased to see Debt Capital Markets continue to evolve in innovative ways which will be scalable in the future.”
