1963: the Autostrade loan | News on paper jams

Let’s go back to the context of time.

We are at the end of the 1950s, while banking activities are strictly regulated, the financing needs for reconstruction are exploding. It was in response to this postwar boom that Eurodollars appeared. Dollars held outside the United States have been designated by this name. Dollars which, thanks to the Marshall Plan, are accumulating in the books of European banks and which will be used in international lending operations. Thus was born the Eurodollar market, which experienced rapid expansion after the return to external convertibility of European currencies at the end of 1958.

The idea of ​​using these funds to launch dollar bonds outside the United States quickly emerged.

In 1963 – the year in which the millennium of the country’s creation is celebrated – the first international bond issue in Eurodollars was launched. International? The issuer was Italian, the admission contract was governed by English law, the place of listing was in Luxembourg and the security was denominated in dollars. History will recall that it was structured on behalf of Autostrade, the motorway concessionaire in Italy. Listed on the Luxembourg Stock Exchange on July 17, 1963, the loan is for an amount of $ 15 million with an interest rate of 5.50% and a maturity of 15 years.

And it is Luxembourg that will be chosen to issue this bond due to the flexibility of its regulations. Legislation adopted in the late 1920s finally paid off and flourished with the development of what should be called the cross-border savings market. The Interest Equalization Tax, also adopted in 1963 by the United States, strengthened the movement. Intended to curb the export of American capital, it increases the cost of foreign issuance in the United States and makes Eurobonds even more profitable.

Favorable regime

At that time, the prime minister was Pierre Werner. The spiritual son of Pierre Dupong, the father of holding companies 29. Coming from the banking world, his leitmotif was to attract them to the market. And like Pierre Dupong, he believes that if “investors did not find the advantage of preferential regime or freedom in Luxembourg, they would easily find it elsewhere”.

Eurobonds open up new perspectives for the market: local banks are exiting the domestic market to become international investment banks and foreign banks are gaining ground in the Grand Duchy. They were encouraged by the creation in 1965 of the financial holding, a structure that allows international groups to structure their bond issues within an attractive fiscal framework. The securities of these loans were exempt from withholding tax.

After World War II, there were 10 banks in the country. There were 26 in 1967. And 100 in 1979.

The 70s are those of the petrodollars. This inflow of liquidity is opening up a new market, that of Eurocredits. Loans intended to finance the states that, after the end of the Bretton Woods agreements in 1971, opened the doors of debt. A new market for the Place that attracts even more players. And services. Banks have started to create services to be paying agents, quotation agents, custodians. There was a need for lawyers to draft prospectuses and issuance contracts, notaries and auditors.

The country, already fully committed to the construction of Europe, is benefiting politically from this development. In 1970 Prime Minister Pierre Werner, considered the father of the financial center, was entrusted with the presidency of a group of experts charged with drawing up an economic and monetary union plan for Europe. A recognition without appeal.

Next Wednesday, go back to 1970 for the first Investors Overseas scandal.

Leave a Comment