36
Euroclear Investments SA Debt investor presentation March 2018
Euroclear Investments SA
Debt investor presentation
March 2018
2
Disclaimer
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THIS DISCLAIMER MUST BE READ BEFORE CONTINUING
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Company, may not be comparable to similarly titled financial measures as presented by other companies. Further, these APMs should not be considered as alternatives to profit after tax, operating
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distributions should not be taken as an indication of current or future performance, results or distributions.
3
Executive Summary
Terms of the offering
• Offering size: €700mm dual tranche issued by Euroclear
Investments:
• A €300-400mm, Euro denominated, 12-year fixed rate
senior unsecured debt instrument
• A €300-400mm, Euro denominated, 30-year fixed rate
corporate hybrid debt instrument with a non-call period of
10 years
Credit rating
• Issuer ratings: AA-/AA (S&P/Fitch)
• Existing senior unsecured debt ratings: AA-/AA (S&P/Fitch)
• Expected issue ratings:
• Senior unsecured debt: AA- / AA (S&P/Fitch)
• Corporate hybrid: A / A+ (S&P/Fitch)
Business overview
• Established in 1968, Euroclear is a leading central securities
depository providing post-trade services
• Provides settlement and related securities services for cross-
border transactions involving domestic and international bonds,
equities, derivatives and investment funds
• Offers transaction settlement, asset servicing and collateral
management services
Transaction rationale
• Reinforce recovery capacity in the group in the context of the
Bank Recovery and Resolution Directive (BRRD) applicable
mainly to Euroclear Investments’s principal subsidiaries, i.e.
Euroclear Bank SA/NV and Euroclear SA/NV
• The anticipated proceeds of €700mm will be downstreamed into
Euroclear Bank SA/NV and Euroclear SA/NV in the form of
instruments that would include MREL and other loss absorption
features
4
Content
Euroclear at a glance
Euroclear strategy
Group consolidated financial performance
Liquidity and capital management
Transaction overview
5
Euroclear at a glance
(*) Central Securities Depository, (**) International Central Securities Depository
6 CSDs*
serving 7 markets
Euroclear Belgium
Euroclear Finland
Euroclear France
Euroclear Nederland
Euroclear Sweden
Euroclear UK & Ireland
+
1 ICSD**
Euroclear Bank
Gateway to the world
• Trusted provider and leader in post-trade services to the global
financial markets
• Founded 50 years ago
• Mission to assist our diversified client base to:
- Ensure securities transactions are processed safely and efficiently
- Reduce complexity, lower costs and mitigate risks
• Open and resilient financial market infrastructure operating under
strong regulatory oversight
• Double-A rating: AA/AA+ (S&P/Fitch) for Euroclear Bank and AA-/AA
(S&P/Fitch) for Euroclear Investments SA
More than 1.7 million
securities worldwide
6
An industry-leading provider of
financial market infrastructure
• Post-trade industry leader with €28.6 trillion
assets under custody (end 2017)
• We offer a global service:
- To clients in over 120 countries
- In 16 languages
- Across 50 major markets
- In 50 settlement currencies
• Our international client franchise includes:
- Over 2,000 clients
- Over 100 central banks
- 90% of the world’s 50 largest banks
• Robust regulatory framework as a financial market
infrastructure, with high levels of capitalization and
strong credit ratings
Key figures
(end 2017)
Source: Euroclear plc 2017 Annual report, subject to shareholders approval in May 2018
7
Group performance highlights
2
4
5
3
1 Leading operator in global post-trade sector, ideally positioned
to benefit from changing operating and regulatory environment
2017 financial performance ahead of expectations, underpinned
by strong business metrics driving positive revenue growth
Increased investment levels in regulatory-driven, cyber security
and growth initiatives, with cost base expected to stabilise in 2018
Resilient, stable and well-diversified business
Disciplined risk management framework with resilient risk profile,
solid capitalisation and limited leverage
8
Group structure
Source: Euroclear plc consolidated figures as of year-end 2017, subject to shareholders approval in May 2018
* DTTC Euroclear Global Collateral Limited
Euroclear plc
Euroclear Investments SA
Shareholders 130 shareholders 84%
Sicovam Holding 16%
Euroclear SA/NV
Euroclear
Bank SA/NV CSDs
Directly supervised activity by National Bank of
Belgium and other local regulators
100% (- 1 share) - BE
100% - LUX
CH
100%
(FR, BE, NL, UK, F, S)
100% (- 1 share)
(BE)
Con
so
lida
ted o
ve
rsig
ht b
y t
he
Natio
na
l B
an
k o
f B
elg
ium
Not directly regulated by
National Bank of Belgium
Other entities • Euroclear Properties
France SA
• Euroclear Re
• Calar Belgium
DEGCL*
S&P: AA-/A-1+
Fitch: AA/F1+
Operating income by entity
50%
UK
S&P: AA/A-1+
Fitch: AA+/F1+
Bond
investors
Issuing entity
9
• Euroclear remains committed to serving the U.K. post-Brexit
• Solutions identified to overcome areas of Brexit-related risk
Prudent approach to managing Brexit-related risks
1. Corporate restructuring
• Strategically important to have
top holding company inside EU
• Intend to propose a new group
structure, with parent holding
company in Belgium
• Proposed restructuring subject
to shareholder approval
2. Ireland
• We plan to establish a new Irish
CSD using the CREST system
• Sustainable solution to continue supporting Irish securities market
10
Content
Euroclear at a glance
Euroclear strategy
Group consolidated financial performance
Liquidity and capital management
Transaction overview
11
Our vision: remain a leading partner to participants
in global capital markets
Continue to strengthen our well-established European Core
One-stop shop providing safe and efficient post-trade sector services
• Settlement, Safekeeping, Asset servicing
Expand growth initiatives
Enhancing liquidity in cash, collateral and financing markets
• Collateral management solutions
• Funds servicing
• Global Reach: International markets
Explore innovation
Innovation to bring new efficiency and trading opportunities to capital markets
• FinTech partnerships to support core business
• Data services and solutions
Consistent strategy, building on client focus and our business expertise
12
Main activities
Establishing a gateway to pan-European securities, providing choice between central and commercial bank money
- >50% of European capital market securities serviced through Euroclear Bank and 6 Domestic CSDs
- Asset Servicing, Funds and Collateral Management services
- Launched Single CSD service providing access to T2S for international investors
Continued investment in our European presence to maintain safe and efficient capital markets
- Investing to implement CSD Regulations
- Establishing a new Irish CSD to ensure continuity of service post-Brexit
- Building new Nordic CSDs IT infrastructures
- Enhancing cyber security resilience
Euroclear
Bank ESES
Well-established, resilient European core Settlement, Safekeeping, Asset servicing
Issuance & settlement
- Fast, efficient, low risk processing of securities
- Direct access to the broadest range of investors across
multiple jurisdictions
- Leader in automation and delivery-versus-payment
settlement which ensures that cash and securities are
exchanged simultaneously
- Remunerated via a fee per instruction
Asset servicing
- Covers all steps in the life cycle of a security
- From distribution of a new issue to timely and accurate
custody-related services
- Automates complex corporate actions while improving
efficiency and reducing risks
- Remunerated via yearly fee based on asset value
13
Expand growth initiatives Collateral management solutions
We support clients in meeting evolving regulatory demands. From East to West, we connect Global Collateral Pools,
providing a diversified range of innovative Collateral Management Solutions
• OTC derivatives: continue to support clients as they transition to new regulatory regime
• GlobalCollateral Ltd: launched Inventory Management Service; moving to client onboarding stage
• Collateral outstanding +7% to €1.150 trillion, benefiting from innovative and diversified product offering
Fund servicing
Euroclear FundsPlace assets under custody up 13% to €2.1 trillion in 2017
• Single access point to cross-border, offshore and domestic funds
• Expanding network of funds markets with links to over 900 fund administrators
• Automated trade and post-trade processing solutions for order routing, settlement and asset servicing
International ETF structure growth benefits from rise of passive management
• Integral part of the industry: approximately 40% of European ETF industry is now international
• Innovation continues: ETF asset class increasingly used for collateral management purposes
14
Expand growth initiatives (cont’d)
Global Reach: International markets
Euroclear connects domestic markets to global investors through ‘Euroclearability’:
• Assisting governments in developing capital market practices to meet global
investor requirements
• Strong traction in Latin America: Chile and Peru became ‘Euroclearable’.
Argentina issued further ‘Euroclearable’ sovereign bonds after returning to capital
markets in 2016
• Continue to work with growth economies, including China, to connect to Euroclear
and increase breadth of domestic securities available through our CSD links
Data and insights: new revenue growth opportunities to complement our core value proposition
• Euroclear Information Solutions aims to provide clients with insights to manage liquidity in a smart way
• Differentiated client offering by combining data offering with existing Euroclear solutions
Explore innovation Data & Information Solutions
15
Regulatory reforms are changing the landscape
in trading and post-trading activities in Europe
• Euroclear is well advanced with CSDR implementation. Having submitted initial applications for each Euroclear CSD in line with official timelines,
Euroclear continues dialogue with regulators in each jurisdiction to complete authorisation process
• Well positioned to take advantage of business opportunities resulting from EU regulations that reinforce the role of financial market infrastructures
• Definitions of CSD
activities of commercial
bank money settlement
• Capital & liquidity
• Dematerialisation
• T+2 settlement
• Settlement Discipline
• Allowing EU CSDs to
compete on a consistent
regulatory playing field
• CSD passport
• Freedom of choice
for issuers
• Single Settlement System for “euro” Central Bank Money DVP settlement
• Settlement and Corporate Actions
• Market practices
• CSDs incentivised to move ‘up the value chain’
• Recovery & Resolution regimes for banks/FMIs
• MREL and bail-in
• Basel III (LCR, Leverage, NSFR)
• Capital Markets Union (integration of Europe’s capital markets)
• MiFIR/EMIR access between trading venues, CCPs and CSDs
• Securities Financing Transaction Regulation (Transparency)
Other
regulations
EU CSD
Regulation
Target 2
Securities
Financial stability
Safety
Cross-border efficiency
Harmonisation
EU Single Market
Competition
Consolidation
16
Euroclear’s leadership team
Referenced from Fitch report on Euroclear Bank (September 2017)
“Risk controls are very strong and investments in risk management, including cyber resilience,
are a management priority. Management teams have a high degree of depth and relevant
expertise for the bank specialized business. Euroclear Bank has a strong corporate culture with
high risk awareness”
Marc Antoine Autheman
Chairman
Lieve Mostrey
Chief Executive Officer
Bernard Frenay
Chief Administrative Officer
Yves Dupuy
Chief Information Technology Officer
Frederic Hannequart
Chief Business Officer
Peter Sneyers
Chief Risk Officer
17
Content
Euroclear at a glance
Euroclear strategy
Group consolidated financial performance
Liquidity and capital management
Transaction overview
18
Value and volume of securities
transactions settled
Revenue growth underpinned
by strong operational performance
Source: Euroclear plc 2017 Annual Report, subject to shareholders approval in May 2018 – figures have been rounded
Securities held in custody € trillion equivalent, year-end
573623
670 655733
170182
191 196
215
-
50.0
100.0
150.0
200.0
250.0
-
200.0
400.0
600.0
800.0
1,000.0
2013 2014 2015 2016 2017
Value of securities transactions settled (EUR trillion)
Number of transactions after netting (million)
787
887
1,068 1,0721,150
14.0
214.0
414.0
614.0
814.0
1,014.0
1,214.0
2013 2014 2015 2016 2017
Average daily collateral
outstanding € billion
24.2
26.0
27.5 27.7 28.6
14.0
16.0
18.0
20.0
22.0
24.0
26.0
28.0
30.0
2013 2014 2015 2016 2017
+3% +10%
+7%
+12%
• Securities held in custody increased by 3.1% to €28.6 trillion between 2016 and 2017
• Significant increase in value (12%) and volume (10%) of securities transactions netted in 2017 compared to 2016
• Average daily collateral in 2017 reached €1,150 billion (7.2% increase) compared to 2016
19
Financial performance in 2017 ahead of expectations
1 Business income corresponds to Net fee and commission income excluding liquidity lines costs considered as non business related items
2 EPS adjusted for deferred tax assets impairments in 2017 and IP one-off tax benefit in 2016
3 Administrative expenses as presented in the 2017 Euroclear plc annual report include the « Provisions » line item presented in this table as a a separate line item
Source: Euroclear plc consolidated figures as of year-end 2017, subject to shareholders approval in May 2018
€ million 2017 FY 2016 FY Y-o-Y
Business income1 1,039 999 4%
Interest, banking & other income 184 163 13%
Operating Income 1,223 1,162 5%
Administrative expenses3 -809 -744 -9%
Share of result in joint venture -10 -7 -41%
Operating profit before tax 403 411 -2%
Provisions 5 -35 38%
Taxation and impairment -172 -78 38%
Profit for the period 236 298 -21%
Earnings per share2 (€/share) 84.6 83.7 1%
Dividend per share 39.0 37.0 5%
• Better than expected 2017 financial performance, with strong revenue figures
• Net Interest Earnings uptick, as interest rates begin to rise
• Year-on-year dividend per share up 5% and adjusted net earnings per share up 1%
• Profit for the year of c. €270m when adjusted for one-off deferred tax asset impairments on losses carried forward in ESA and DEGCL,
in line with last year when excluding the one-off tax benefit in 2016 related to the IP termination with the Bank (see adjusted EPS figures)
20
Operating profit levels stable, despite planned investments
* Business income corresponds to Net fee and commission income, excluding liquidity lines costs considered as non business related items
Source: Euroclear plc 2017 Annual Report, subject to shareholders approval in May 2018
• Business income increased in 2017 by 4% compared to 2016
• Operating margin decreased slightly following increase of operating expenses
• Operating profit before impairment and taxation at stable levels, despite planned investments in regulatory and
cyber initiatives
Operating profit before impairment and taxation € million
Business income* and Operating margin € million
890
938
997 999
1,039
33.0%
34.6%
35.4% 35.4%33.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
50.0%
800
850
900
950
1,000
1,050
1,100
2013 2014 2015 2016 2017
Business Income Operating margin
326.1 359.2
400.6 411.0 [VALUE]
0.0
50.0
100.0
150.0
200.0
250.0
300.0
350.0
400.0
450.0
2013 2014 2015 2016 2017
21
Underlying RoE and adjusted EPS
consistent with prior year levels
Source: Euroclear plc 2017 Annual Report, subject to shareholders approval in May 2018
Adjusted return on equity
• Adjusted ROE in line with last year, demonstrating resilience with regards to capital requirements as a Financial
Market Infrastructure supported by strong issuer credit ratings
Adjusted net earnings per share €/share
8.3%8.7% 8.7%
7.7%7.5%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
2013 2014 2015 2016 2017
69.3
78.687.0 83.7 84.6
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
2013 2014 2015 2016 2017
22
Euroclear Investments SA’s stand-alone
historical performance
• Cash flows and P&L are mainly driven by recurring dividend upstreaming from group operating entities
• At the end of 2016, assets mainly comprised financial participations (€581 million), cash at banks (€121 million) and loans (€505 million)
Income statement € million
Balance sheet € million
* Source: Euroclear Investments unconsolidated financial statements as of and for the years ended 31 December 2016 and 31 December 2015
2016 2015 2014
Net interest income / expenses 0.2 0.2 0.2
Other income 0.9 1.2 0.9
Dividend income 90.1 212.2 251.1
Operating income 91.2 213.6 252.2
Operating expenses -1.5 -1.4 -1.3
Operating profit 89.7 212.2 251.0
Tax 0.1 0 0
Net profit 89.8 212.2 250.9
2016 2015 2014
Cash & cash equivalent 121 5 10
Loans and advance 505 16 18
Other assets and accrued income 2 1 1
Participations in group company 581 589 581
Total assets 1,209 611 610
Long-term debt 595 – –
Other liabilities 2 0 0
Shareholders’ equity 613 610 610
Total liabilities 1,209 611 610
23
Content
Euroclear at a glance
Euroclear strategy
Group consolidated financial performance
Liquidity and capital management
Transaction overview
24
Strong credit ratings for both issuer and instrument
Both rating agencies rated the issuer one notch lower than Euroclear
Bank, which is mainly due to Euroclear Investments being:
• A non-operating holding company
• Not directly supervised by the group regulator (NBB)
Rationale for strong issuer credit rating:
1. Projected cash flow ratios remain consistent with minimal financial risk
profile assessment
2. Euroclear group will maintain its:
• Low risk profile
• Satisfactory underlying profitability
• Strong capitalisation
• Leading position in its business
3. Strong capacity to service the debt issue
Rating agency Euroclear Investments
(“the Issuer”) ratings
Existing senior debt
ratings
New senior issue ratings
(expected)
New hybrid issue ratings
(expected)
Euroclear Bank
ratings
S&P AA- / A-1+ AA- / A-1+ AA- / A-1+ A / XX
AA / A-1+
Fitch AA / F1+ AA / F1+ AA / F1+ A+ / XX AA+ / F1+
Referenced from Fitch report on Euroclear Bank (October 2016)
“The bank franchise is sufficiently strong and diversified to generate sound
profitability while maintaining their current low risk profile”
Referenced from Fitch report on Euroclear Bank (October 2016)
“Risk controls are very strong and investments in risk management are a
management priority. To date, the track record of avoiding operational losses
has been strong”
Referenced from S&P report on Euroclear Bank (November 2015)
“Strong risk-management controls and track record of very low losses arising
from operational and credit risks.”
Referenced from S&P report on Euroclear Bank (November 2017)
“Exceptional current liquidity position, aided by good cash flow generation and
on-balance-sheet liquid assets”
25
3 main types of risk in Euroclear activities
Operational risk
Risk of loss resulting from inadequate or failed internal processes, people
and systems, or external events. Includes custody risk, model risk, fraud
and cyber, business disruption, system failures and model risk
Euroclear operates a robust group-wide operational risk management
framework that focuses on the identification, assessment, management,
monitoring and reporting of operational risks and issues
Banking risks (Euroclear Bank only)
Credit risk
Risks arising from the default or failure of a participant or counterparty to
meet their agreed upon financial obligations to Euroclear
Liquidity risk
Risks arising from being unable to settle a cash or securities obligation
when due resulting from inappropriate and/or insufficient liquidity sources
Market risk
Risks to Euroclear (on or off balance-sheet) positions arising from
movements in market prices. Market risk arises from possible changes in
foreign exchange rates, interest rates, equity or commodity prices
Credit risk is borne mainly by Euroclear Bank as a single-purpose
settlement bank. Credit risks are closely monitored both intra and inter day.
Other operating entities have a very low financial risk appetite with
settlement services offered in central bank money
Liquidity is key to Euroclear Bank’s business model. We operate a robust
framework for managing intra and inter day operations with a high level of
preparedness for unexpected and/or significant liquidity shocks
Euroclear Bank has a low level of market risk derived primarily from interest
rate and foreign exchange exposures resulting from investment of its capital
and future earnings. No trading activity takes place.
A hedging strategy is in place to mitigate this risk
Legal and compliance risk
Risks arising from applicable or upcoming laws, regulations, market rules
and prescribed practices in all relevant jurisdictions, enforceability of
contracts, conflicts of laws between jurisdictions
A group-wide ethical and compliance framework aims to adequately
identify, monitor and manage legal and compliance risks. The risk areas
monitored include, inter alia, fraud, market abuse and money laundering,
and also consider the risks arising from upcoming regulations
Key risks Mitigating actions
26
Group operational risks are managed tightly
Source: Euroclear plc consolidated figures as of year-end 2017, subject to shareholders approval in May 2018
• Low operational risk profile of Euroclear Bank and group
CSDs is demonstrated by its loss history, with very few loss
cases observed over the past 10 years
• Firm commitment, dedicated resources and adequate insurance
policies to ensure business continuity and operational risk
management
• Scenario analysis is used to assess operational risks at very
high confidence levels, combining internal loss history and
external loss data
• Implementation of Lean management philosophy in 2008-2009
(together with other measures) reduced operational risks
• 3 data centres provide business continuity
(2 synchronous data centres in France, 1 asynchronous data
centre in Belgium enabling same-day resumption of business
critical services)
• 4 operational centres further support business continuity
(2 operational centre in Belgium, 1 in Poland, 1 in Hong-Kong)
Risk Weighted Assets – operational risk & loss history
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
2015 2016 2017
RWA - operational risks (€ million)
Operational losses / operating profit before taxation (%)
27
Conservative approach to credit risk
Risk Weighted Assets – credit risk
€ billion
Clients credit exposures
• More than 99% of credit to clients is extended on a very short term
and secured basis
• More than 99% of secured credit is granted to investment grade
clients and is backed by investment grade collateral
• Unsecured credit only granted to exempt entities, in accordance
with regulation
Treasury credit exposures
• Treasury exposures arise principally from cash balances left on
account by Euroclear Bank’s clients (c. €17 billion end 2017)
• Largest part of treasury exposure engaged on an overnight basis
• More than 85% of treasury activity conducted on a secured basis
• 98% of treasury counterparts (secured & unsecured) are investment
grade and predominantly A- rated or better
As a result of our conservative risk profile and credit exposures, which are almost entirely short-term and secured,
Risk Weighted Assets (RWA) only represent a very low fraction of total group assets (<10%)
Source: Euroclear plc consolidated figures as of year-end 2017, subject to shareholders approval in May 2018
-
5
10
15
20
25
2015 2016 2017
Total assets RWA credit risk
28
Liquidity risk and group cash flows
Financial assets portfolio: liquidity risk carefully managed
According to investment policies, group own cash is invested:
• In AA/AAA government or supranational EUR-denominated and ECB eligible securities, with very short term maturities
for Euroclear Bank
• For all other entities of the group (incl. CSDs) in a combination of:
• EUR term deposits or similar products with maturity not exceeding 3 years and counterparties rated A or better
• EUR government bonds qualifying as High-Quality Liquid Assets (HQLA) and corporate bonds with an average A rating
(duration of portfolio below 2 years)
• High degree of investment granularity: maximum exposure to a single counterparty of 10% of group regulatory capital
Group cash flows demonstrate strong liquidity levels
• Debt proceeds will increase recovery capacity in the group
• Debt repayment can be funded by group operating cash flows, while distributions can be accommodated to ensure
repayment at maturity
29
Industry-leading capital position
Source: Euroclear plc consolidated figures as of year-end 2017, subject to shareholders approval in May 2018
* Combined Capital conservation buffer (1.9%) and O-SII buffer (0.7%) reach about 2.6% on top of the SREP requirement (buffers applicable in 2017)
• Euroclear SA/NV is subject to prudential supervision by the National Bank of Belgium (NBB) and minimum Pillar 1 – CET1 capital
requirements (under CRD IV)
• As of December 2017, the group capital position was around five times the minimum CET1 capital required under CRD IV (including
the O-SII buffer and the capital conservation buffer)
• Euroclear SA/NV consolidated has been designated by the NBB as a domestic systematically important institution and is required to
satisfy a Supervisory Review and Evaluation Process (SREP) capital requirement mostly linked to operational and credit risks.
This requirement is larger than average bank requirements (given the very low RWA density). As at December 2017, the group CET1
ratio was close to double the overall requirement
• Group capital ratios are expected to reach 40-45%, following group distribution policy
• Self-financing of the EU CSD regulation implications
Capital ratio and regulatory own funds (€ billion)
30
39.0
37.036.3
31.5
29.6
25.4
201720162015201420132012
Constant dividend payer with growing shareholder’s equity
Source: Euroclear plc Annual reports – 2017 report subject to shareholders approval in May 2018
• Proven track record of commitment to delivering long-term value to shareholders, while preserving significant
shareholder’s equity
Dividend per share €
+5%
3,212 3,2443,476 3,560 3,671
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
2013 2014 2015 2016 2017
Total group shareholder’s equity at year end € million
+3%
31
Content
Euroclear at a glance
Euroclear strategy
Group consolidated financial performance
Liquidity and capital management
Transaction overview
32
Rationale for the transaction
• Proactively build MREL capacity in advance of the
final Minimum Requirement for own funds and Eligible
Liabilities (MREL) being communicated
• Reinforce recovery capacity in the group in the
context of the Bank Recovery and Resolution Directive
(BRRD) applicable mainly to Euroclear Investments’s
principal subsidiaries, i.e. Euroclear Bank SA/NV and
Euroclear SA/NV
• Downstream anticipated proceeds of €700mm into
Euroclear Bank SA/NV and Euroclear SA/NV in the
form of instruments that would include MREL and other
loss absorption features
Euroclear Investments SA
Euroclear SA/NV
Euroclear
Bank
SA/NV
Bond
investors
Senior unsecured bond
EUR 300-400mm – 12 yrs
Corporate hybrid bond EUR
300-400mm – 30NC10 yrs
Proceeds downstreamed
Proceeds
downstreamed
33
Senior Notes 30 NC 10 Hybrid Notes Issuer • Euroclear Investments SA
Issue Date • [ 2018]
Currency • EUR
Proposed Offering • Senior Notes (the “Senior Notes”) • Subordinated Resettable Fixed Rate Notes (the “Hybrid Notes”)
Issuer Rating • AA- (stable) / AA (stable)
Expected Rating* • [AA-] / [AA] • [A] / [A+], typically 2 notches below the senior ratings
Ranking
• Direct, unsubordinated, unsecured and unconditional obligations, pari passu
among themselves and at least pari passu with all other present and future
unsubordinated and unsecured obligations, save for such obligations as may be
preferred by provisions of law that are both mandatory and of general application
• Direct, unsecured and subordinated obligations, senior only to Junior Securities, pari passu to
Parity Securities, without preference or priority among themselves
Maturity Date • [] 2030 (Year 12) • [] 2048 (Year 30)
Issuer Call Option • None • At Par on [ 2028 (Year 10)] (“First Call Date”) and any Interest Payment Date thereafter
Interest Rate
• The Senior Notes bear interest from (and including) [•] 2018 at the rate of [•] per
cent. per annum, payable annually in arrear on [•] in each year and for the first
time on [•] 2019
• (a) From the Issue Date (including) to the First Call Date (excluding): at a fixed rate of []% per
annum, payable annually in arrears (ACT/ACT)
• (b) Thereafter: resets at the First Call Date and every 5 years thereafter to the prevailing 5 Year
Euro Mid-Swap plus the initial credit spread of []% payable annually in arrears (ACT/ACT)
Interest Deferral • None
• Optional interest deferral at the Issuer’s discretion. Deferral cumulative and compounding (cash
settled)
• Optional settlement of deferred interest at any time
• Mandatory settlement of deferred interest upon: (i) a distribution on, or repurchase or redemption
of, Junior or Parity Securities, (ii) redemption of the Notes (iii) upon the occurrence of an
Enforcement Event (including winding-up, etc.) (all subject to customary carve-outs)
Early Redemption
Events • Taxation reasons, Make-whole redemption or following an Event of Default
• Issuer Call Option from First Call Date
• Withholding Tax Event or Substantial Repurchase Event (>80%), each at Par
• Rating Methodology Event or Tax Deductibility Event, each at 101% until the First Call Date, then
at Par thereafter
Event of Default • Non-payment, Breach of other obligations, Cross-default, Insolvency, Winding-up
etc., Analogous event, Change of ownership or Unlawfulness • None
Exchange/ Variation • None • Yes, in case of a Withholding Tax Event, Rating Methodology Event, Tax Deductibility Event
subject to certain conditions including not materially prejudicial to the hybrid Noteholders
Issuer Substitution • Yes, subject to certain conditions including not materially prejudicial to the Senior
Noteholders • Yes, subject to certain conditions including not materially prejudicial to the hybrid Noteholders
Replacement Language • None • Intent-based replacement language (subject to customary carve outs) until maturity
Equity Credit • None • S&P: ‘Intermediate’ (50%) until the First Call Date ([ 2028) / Fitch: 50% until Year [ 2043 (Year
25)]
Listing / Docs • Irish Stock Exchange / Standalone prospectus (RegS)
Denominations • EUR 100,000
Governing Law • English law • English law, except for subordination provisions governed by Luxembourg law
IFRS Treatment • Liability • Liability
Summary Senior and Hybrid Terms
This information has been prepared solely for information purposes – the summary of any proposed transaction described herein is incomplete and subject to change without notice. It is neither meant to be, nor should it be
construed as, an attempt to define all the terms and conditions regarding a proposed issuance of securities. Summary terms should be read in conjunction with full Terms and Conditions and Prospectus
*A security rating is not a recommendation to buy, sell or hold securities and should be evaluated independently of any other rating. The rating is subject to revision or withdrawal at any time by the assigning rating organisation.
34
Hybrid Structural Comparison
Issuer Euroclear Investments Deutsche Börse Alliander Total Allianz
Issue Date [Mar-2018] Jul-2015 Jan-2018 Oct-2016 Jan-2017
Size / Coupon [€300-400mn / ] €600mn / 2.748% €500mn / 1.625% €1,500mm / 3.369% €1,000mm / 3.099%
Re-offer Spread [] ms + 226.3bps ms + 95.2bps ms + 310bps ms + 235bps
Equity Credit (M/S/F) - / 50% / 50% - / 50% / - 50% / 50% / - 50% / 50% / - 25% / 100%(2) / 100%(3)
S&P Equity Cliff [Mar-2028] Feb-2021 Jun-2025 Oct-2026 Jul-2027
Tenor [30NC10] 25.5NC5.5 PerpNC7.4 PerpNC10 30.5NC10.5
Senior Debt Rating (M / S / F) - / AA- / AA - / AA / - Aa2 / AA- / - Aa3 / A+ / - Aa3 / AA / -
Instrument Rating (M / S / F) - / [A] / [A+] - / A+/ - A2 / A / - A2 / A- / - A2 / A+ / -
Notching - / [2] / [2] - / 2 / - 3 / 2 / - 2 / 2 / - 2 / 2 / -
Issuer Call Option [2028], and on every
IPD thereafter
2021, and on every
IPD thereafter
2025, and on every
IPD thereafter
2026, and on every
IPD thereafter
2027, and on every
IPD thereafter
Interest Rate
(Initial interest rate, reset,
and step-ups)
Fixed until the first call date, then
resets every 5 yrs to € 5 yr ms +
ICS
Fixed until the first call date, then
resets every 5 yrs to € 5 yr ms +
ICS + relevant step-up
Fixed until the first call date, then
resets every 5 yrs to € 5 yr ms +
ICS + relevant step-up
Fixed until first call date, then
reset every 5yrs to € 5 yr ms +
ICS + relevant step-up
Fixed until first call date, then
floating 3m EURIBOR + ICS +
relevant step-up
Step-ups None
25bps in yr 5.5
500bps if a CoC Call Event occurs
and the Notes are not called
25bps in yr 12.4
75bps in yr 27.4
25bps in yr 10
100bps in yr 30 100bps in yr 10.5
Optional Interest Deferral Cumulative Cumulative Cumulative Cumulative Cumulative
Mandatory Interest Deferral None None None None
Insolvency Event, Regulatory
Prohibition, Solvency Capital
Event
Pusher / Stopper Pusher Pusher Pusher Pusher Pusher
Special Redemption Event WHT (100), T(101*), R(101*), SR
[>80%] (100)
WHT (100), CoC (100), T(101*),
R(101*), SR [>75%] (101*)
WHT (100), T(101*), R(101*), A
(101*), SR [>80%] (101*)
WHT (100), T(101*), R(101*), A
(101*), SR(1)
WHT (100**), R(100**), A(100**),
T (100**), Reg (100**)
Replacement Language Intention based Intention based Intention based Intention based n/a
Ranking Subordinated Subordinated Subordinated Subordinated Subordinated
Listing Ireland Luxembourg and Frankfurt Amsterdam Paris Luxembourg
IFRS Treatment Liability Liability Equity Equity Liability
Denominations €100,000 €1,000 / €1,000 €100,000 / €1,000 €100,000 / €1,000 €100,000
IPD = Interest Payment Date; ICS = Initial Credit Spread; WHT = Withholding Tax / Gross-Up Event; T = Tax Event; A = Accounting Event; R = Rating Agency Event; SR = Substantial Repurchase Event; CoC = Change of Control; Reg = Regulatory Event; *Redemption price
changes to 100 after first call date; ** Subject to replacement with other own funds regulatory capital of at least the same quality if redemption occurs prior to Jul-2022; (1) 101* for Premium Substantial Repurchase Event (≥90%), 100 for Par Substantial Repurchase Event
(<90%, ≥75%); (2) Provided within headroom limits; (3) 100% credit for Capital Adequacy Ratio; included in Fixed Charge Coverage and Financial Leverage Ratio; Source: Companies’ offering circulars, Bloomberg
This information has been prepared solely for information purposes. Summary terms should be read in conjunction with full Terms and Conditions and Prospectuses
35
Summary
Euroclear's robust financial performance:
• 2017 results ahead of expectations despite planned investments in cyber, regulatory and innovation initiatives
reflecting resilience of business model
• Operating model can absorb higher volumes of activity with limited increase in costs
• Conservative balance sheet and capital strategy reflected in our strong ratings
Rationale for debt issuance in Euroclear:
• €300-400 million senior debt and €300-400 million corporate hybrid issuance to increase recovery
capacity in the Group
• Strong repayment capacity supported by stable cash flow generation
Euroclear capital position will remain extremely solid post issuance:
• Target 40-45% fully loaded common equity Tier 1 ratio
Bernard Frenay Group Chief Financial Officer
T + 32 2 326 23 06
F + 32 2 326 14 49
Baudhuin Douxchamps Head of Corporate Finance
T + 32 2 326 94 70
F + 32 2 326 14 49
Martine Deroanne Head of Corporate Financial Advisory
T + 32 2 326 12 08
F + 32 2 326 14 49
euroclear.com
Charles Meeus General Manager Euroclear Investments SA
T + 352 27 48 50 84
F + 352 27.48.50.60
