Eurobonds to escape EU order

Jane Padgham12 April 2012

THE BULK of the City's lucrative Eurobond market is set to escape the controversial European Union single prospective directive that threatens to cost small companies an estimated £150,000 a year in red tape.

Chris Huhne, the MEP who is responsible for reviewing the proposals for the European Parliament, said he is confident that the 60 amendments to the proposed directive he has put forward will be accepted. 'If the Commission says its own proposals need modifying, as it has, we can be fairly confident this will happen,' he said.

The single prospective directive aims to allow bond and share issuers to sell across the EU with one set of disclosure documents. As the directive currently stands, any Eurobond deal involving a full listing needs as much documentation as an initial public offering of shares being sold to retail investors.

The fear is that the extra regulatory burden and cost involved in complying with the directive could drive international debt issuance outside Europe. The vast majority of the issuance takes place in the City, and is worth about £2 trillion a year.

Key among Huhne's amendments is the suggestion that all but the very biggest Eurobond issues - those with units of e50,000 (£30,980) or more - will be exempt from the directive. But he gave his support to the principle behind the directive, saying: 'The idea is to find a solution to the problems rather than ditch the whole thing.'

Huhne's amendments were sent off for translation last week. They will be presented to the Economic and Monetary Affairs Committee in December and should be put before the European Parliament in February. The amended directive should be rubber stamped by the end of next year.

There are also fears that without carefully crafted exemptions, the directive could hit Europe's junior share markets, including London's Alternative Investment Market. The chairman of the London Stock Exchange, Don Cruickshank, will meet EU single market commissioner Fritz Bolkestein this week to warn him not to ride roughshod over small-business interests.

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