DTCC and another tax services firm, Acupay System LLC, were key to Banco Santander’s recent multi-billion-dollar note issuance – the first Spanish debt offering in U.S. markets in more than two years.
Led by Lehman Brothers and Deutsche Bank, and aided by tax services provided by DTCC and Acupay, Banco Santander was able to tap the U.S. debt market last week with a $4 billion “144A” note offering. The SEC’s Rule 144A exempts companies from stringent registration requirements for private resales to qualified institutional buyers.
The tax services were critical to the offering because, under a law Spain enacted in mid-2003, Spanish borrowers must collect and file detailed information on the identity of beneficial holders eligible for “at-source” tax relief. Until Banco Santander teamed up with DTCC and Acupay to provide noteholders tax relief “at the source,” no Spanish borrower had sold debt in the U.S. market for two years because data collection was difficult and investors would have had to pay withholding taxes of 15% immediately.
DTCC’s TaxReliefSM, a service offering of DTCC’s depository subsidiary, allows for automatic tax adjustments either at the time of interest or dividend payments (“at-source” relief) or through accelerated refunds. Acupay, with offices in London and New York, transmits securities-related tax information from investors to issuers in a highly secure fashion.
Lehman Brothers worked with DTCC and Acupay for three months to develop the solution used in the Santander transaction. As a result of DTCC and Acupay’s work, Spanish issuers and guarantors will now be able to enter debt and preferred markets in the United States, according to Jim Merli, managing director and head of global debt syndicate for Lehman Brothers.
According to Antonio Torio, Banco Santander vice president, debt capital markets, “The U.S. debt market is very important to Santander. We’re pleased to be able to return to this market using services from DTCC and Acupay that permit us to comply with Spanish tax authorities and meet the needs of our foreign investors who expect tax relief ‘at source’.”
“Spain’s tax reporting requirements are a challenge to the global financial services industry,” noted William Salva, DTCC group director for Tax Services. “So we’re proud we were able to implement procedures that we expect to become the industry standard for Spanish issues in the months ahead. Our TaxRelief service now provides withholding tax relief services on hundreds of DTC-eligible securities from 20 different markets, and we deliver more than $1 billion in tax relief benefits to cross-border investors every year.”
“It was great to put our expertise together with an industry leader like DTCC and create a solution that works for issuers, investors and custodians alike,” said Robert Apfel, president of Acupay System LLC. @
Based in Tokyo and operated by the company’s DTCC Data Repository (Japan) KK (DDRJ) subsidiary, this is the first trade repository to be approved and established for the Japanese market.Read More