AIIB issues its first digitally native note on Euroclear’s D-FMI platform – News – AIIB

The Asian Infrastructure Investment Bank (AIIB) Issues First Digitally Native Note on Euroclear’s Digital Financial Market Infrastructure (D-FMI)

Introduction

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.

Issuance Details

• The issuance, the first by an Asia-based issuer, was executed via Euroclear’s Digital Securities Issuance (D-SI) service.
• 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.

AIIB’s Commitment to Innovation

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.”

Partnership with Citi

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.

Support from BMO Capital Markets

“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.”

Key Transaction Terms

1. Issuer: Asian Infrastructure Investment Bank (“AIIB”)
2. Rating: Aaa/AAA/AAA (Moody’s, S&P and Fitch), all stable
3. Issue Amount: USD 300,000,000
4. Status: Direct and Unsecured
5. Pricing Date: 20 August 2024
6. Settlement Date: 22 August 2024 (T+2)
7. Maturity Date: 15 January 2027
8. Coupon: 4.0%, Semi-Annual, 30/360, Following, Unadjusted
9. Re-offer Spread to mid swaps: +32 bps
10. Re-offer Price: 99.904%
11. Re-offer Yield: 4.0%
12. ISIN: XS2615318362
13. Listing: Luxembourg Stock Exchange’s Regulated Market
14. Lead Managers: BMO and Citi

About AIIB

The Asian Infrastructure Investment Bank (AIIB) is a multilateral development bank whose mission is Financing Infrastructure for Tomorrow in Asia and beyond—infrastructure with sustainability at its core. We began operations in Beijing in 2016 and have since grown to 109 approved members worldwide. We are capitalized at USD100 billion and AAA-rated by the major international credit rating agencies. Collaborating with partners, AIIB meets clients’ needs by unlocking new capital and investing in infrastructure that is green, technology-enabled and promotes regional connectivity.

About Euroclear

Euroclear group is the financial industry’s trusted provider of post trade services. Guided by its purpose, Euroclear innovates to bring safety, efficiency and connections to financial markets for sustainable economic growth. Euroclear provides settlement and custody of domestic and cross-border securities for bonds, equities and derivatives and investment funds. As a proven, resilient capital market infrastructure, Euroclear is committed to delivering risk-mitigation, automation and efficiency at scale for its global client franchise. The Euroclear group comprises Euroclear Bank, the International and Irish CSD, as well as Euroclear Belgium, Euroclear Finland, Euroclear France, Euroclear Nederland, Euroclear Sweden, Euroclear UK & International.

About Citi

Citi is a preeminent banking partner for institutions with cross-border needs, a global leader in wealth management and a valued personal bank in its home market of the United States. Citi does business in more than 180 countries and jurisdictions, providing corporations, governments, investors, institutions and individuals with a broad range of financial products and services.

About BMO

BMO Financial Group is the eighth largest bank in North America by assets, with total assets of $1.4 trillion as of April 30, 2024. Serving customers for 200 years and counting, BMO is a diverse team of highly engaged employees providing a broad range of personal and commercial banking, wealth management, global markets and investment banking products and services to 13 million customers across Canada, the United States, and in select markets globally. Driven by a single purpose, to Boldly Grow the Good in business and life, BMO is committed to driving positive change in the world, and making progress for a thriving economy, sustainable future, and inclusive society.

SDGs, Targets, and Indicators

1. SDGs Addressed or Connected to the Issues Highlighted in the Article:

• SDG 9: Industry, Innovation, and Infrastructure
• SDG 17: Partnerships for the Goals

The article discusses the Asian Infrastructure Investment Bank’s (AIIB) successful issuance of its first digitally native note (DNN) on Euroclear’s Digital Financial Market Infrastructure (D-FMI). This highlights the use of innovative technology and infrastructure in the financial market, which aligns with SDG 9’s focus on promoting sustainable industrialization, fostering innovation, and building resilient infrastructure. Additionally, the collaboration between AIIB, Euroclear, BMO Capital Markets, and Citi demonstrates the importance of partnerships in achieving the SDGs, particularly SDG 17.

2. Specific Targets Based on the Article’s Content:

• Target 9.3: Increase the access of small-scale industrial and other enterprises to financial services, including affordable credit, and their integration into value chains and markets
• Target 17.16: Enhance the global partnership for sustainable development, complemented by multi-stakeholder partnerships that mobilize and share knowledge, expertise, technology, and financial resources

The article highlights the use of digital securities and innovative financial market infrastructure to raise funds for AIIB’s sustainable development bond program. This aligns with Target 9.3, as it promotes access to financial services and integration into markets for enterprises. Additionally, the collaboration between AIIB, Euroclear, BMO Capital Markets, and Citi demonstrates a multi-stakeholder partnership, supporting Target 17.16.

3. Indicators Mentioned or Implied in the Article:

• Indicator 9.3.1: Proportion of small-scale industries in total industry value added
• Indicator 17.16.1: Number of countries reporting progress in multi-stakeholder development effectiveness monitoring frameworks that support the achievement of the SDGs

The article does not explicitly mention indicators, but it implies the relevance of Indicator 9.3.1, which measures the proportion of small-scale industries in total industry value added. The use of digital securities and innovative financial market infrastructure can potentially benefit small-scale enterprises by providing them with access to financial services and integration into markets. Additionally, Indicator 17.16.1 is relevant as it measures the number of countries reporting progress in multi-stakeholder development effectiveness monitoring frameworks, which aligns with the collaboration between AIIB, Euroclear, BMO Capital Markets, and Citi.

Table: SDGs, Targets, and Indicators

Source: aiib.org