LBBW issues blockchain-based asset-backed securities
Client(s) Landesbank Baden-Wuerttemberg
Jones Day advised Landesbank Baden-Württemberg (LBBW), a universal bank and the central bank of the savings banks in Baden-Württemberg, Saxony, and Rhineland-Palatinate in Germany, on its pilot project regarding the blockchain-based issuance and redemption of asset-backed commercial paper (ABCP). The securities were issued by Weinberg Capital DAC as issuer vehicle under the securitization program sponsored by LBBW. Moody's and Fitch, appointed rating agencies for the program, accompanied the project and confirmed the rating of the program. The use of Distributed Ledger Technology (DLT) enables Weinberg to settle the issuance as well as the redemption of securities through the blockchain. In this pilot transaction, both the issuance of the securities as well as the payment of the issue price were settled on a "delivery vs. payment" basis without any parallel paper-based process.
The transaction with asset manager MEAG as investor has successfully demonstrated that, by using DLT, the time to execute a transaction can be significantly reduced, since the trade settled directly between issuer and the investor automatically through smart contracts on the blockchain without the involvement of any intermediaries. This creates significant advantages for investors, in particular in transactions involving short-term securities (commercial paper). Following the Schuldschein transactions arranged by LBBW in 2017 and 2018, this project is seen as another milestone on the road to complete digitization of financial transactions. The successful completion of the pilot transaction provides the legal and technical platform for the roll-out of the DLT-based issuance and settlement of securities to further investors.
