Europe’s first Covid-19 recovery bond issued on Luxembourg Stock Exchange
The European Union’s first ever Covid-19 pandemic recovery instrument under its €800bn NextGenerationEU (NGEU) plan has finally been issued. The first bond, which is a €20bn issuance with a 10-year maturity, is the largest institutional single tranche euro-denominated bond ever issued and it has rightly elicited massive investor response. Issued on the Luxembourg Stock Exchange (LuxSE), the bond was seven times oversubscribed, with demands exceeding €142bn. The deal saw 87% distribution to European investors, while 10% reached Asian investors and the remaining 3% went to investors from the Americas.
Under the NGEU, the European Commission seeks to raise €800bn in current prices on capital markets over the next five years and relay these funds as grants and loans to member states. In 2021, the Commission expects to raise €80bn through long-term bonds, topped by billions of euros in short-term EU bills to cover the remaining financing requirements. The programme also includes a prospective green bond issuance of up to €250bn, as 30% of the target is allocated to green investments. The bond issuances are governed by Luxembourg law.
This is not the only tool in the Commission’s arsenal to tackle the impact of the pandemic. In October 2020, it had issued its first social bond under its EU Support to mitigate Unemployment Risks in an Emergency (EU SURE) programme on LuxSE and has so far, issued €89.6bn worth of social bonds on this exchange.