Luxembourg Borrows €2.5 Billion in Record Time for the Post Lockdown Relaunch

When setting up their Covid-19 rescue plan for the Luxembourg economy, the government had announced its intention to borrow up to €3 billion from the markets. It has been achieved earlier this week.

Beneficiating of a negative interest because of an AAA rating, the speed with which this critical funding was secured illustrates the faith investors have in Luxembourg soverign debt. It will also give additional ressources to Luxembourg’s state treasury.

Finance minister Pierre Gramegna said: "The application for shares cumulated at €6.5 billion which represents a request 4 times higher than the initial offer for investment"

Institutional investors in the country, notably insurers account for a quarter of this total. The rest was put up by investors from the eurozone, the UK and Switzerland, mainly banks (BCEE, BGL BNP Paribas, BIL, Deutsche Bank, HSBC). The loan will be listed on the Luxembourg stock exchange and is composed with a first tranche of €1.5 billion set to mature within five years and the other €1 billion after 10 years.

His ministry having orchestrated the loan move, finance minister Pierre Gramegna commented ‘‘the move will allow the state to reinforce its liquidity cushion, while at the same time guaranteeing the commencement of the first round of stabilization measures, as outlined in the rescue plan, in order to cope with the Covid-19 crisis.’’

The minister added that this loan did not constitute a risk for the public finances of Luxembourg, because Luxembourg public debt, currently running at 20%, would only be increasing from 3% to 5%.  

Edited by Aude Ghespière