On October 4, 2012, the Luxembourg office of the corporate services firm Intertrust filed annual accounts on behalf of one of its clients, The Nielsen Company (Luxembourg) SARL –  an intermediary holding of the global market research and media audience firm Nielsen. The document revealed that a $10.5 billion series of transactions code-named “the Emerald Project” had taken place in January 31, 2011.

On that same day, an ocean away in Lower Manhattan, Nielsen was listed on the New York stock exchange after a period in private equity ownership. Despite being headquartered a few subway stops away on Broadway, the group’s parent company was, at the time, registered in the Netherlands. 

As Nielsen floated, it had $14.4 billion in total assets on its balance sheet. The Emerald Project represented the vast majority of that value, or over five times the $1.8 billion raised through the IPO completed on that day. It featured a secret weapon identified in later filings as the “Emerald loan”.

Over the past decade, this and similar subsequent debt arrangements have extracted over $1 billion in interest from US companies in the Nielsen group and channelled this financial flow to lower-tax European jurisdictions. As you might have guessed, the Emerald loan was not named by chance – it was originated by an Irish subsidiary and later owned by two others, all of which have gone into liquidation here in recent weeks. They never had any employees.

This is their story as documented in more than 60 documents filed by Nielsen group companies over the past decade across Ireland, Luxembourg, the Netherlands, the UK and the US. It was never noticed, and never reported – until now.

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Since its foundation by Arthur C. Nielsen in Chicago in 1923, the firm has become a go-to data source for marketing professionals worldwide. Whether you want to know which new beverage was most successful in Australia this year or how many Americans watched a particular TV show across multiple platforms, Nielsen can tell you. 

Despite this success, there has always been a degree of soul-searching in Nielsen’s recent history. On the business side, efforts to integrate all services are now being ditched in favour of two separate companies (Connect and Media) that will soon focus on consumer insights and media audiences separately. Meanwhile, ownership of the group has seen dramatic changes, from its leveraged buy-out by a consortium of private equity firms including Blackstone and Carlyle in 2006 to its IPO five years later.

Those twist and turns have been accompanied by internal corporate restructurings and successive tax inversions. The group’s parent company first became Dutch in 1999 following its acquisition by the local publisher VNU. It maintained its registration in the Netherlands after the 2006 American private equity buy-out, and through its entry on the New York stock exchange – before formally turning into a British PLC in 2015. Meanwhile, increasingly convoluted intermediary holding structures expanded across the Netherlands and Luxembourg.

As it prepared to float at the end of 2010, Nielsen was (and still is) mostly an American business. Year after year, just over half of its revenue has come from the US and the vast majority of its assets are located there. The American market has also become more and more crucial to its profitability. As Nielsen struggled in recent years, losing more than half of its share price since 2016 and posting net losses in both 2018 and 2019, the US share of its operating profit increased. Last year, the group posted operating losses everywhere except in the US and in its much smaller Asia-Pacific market.

Protecting American profits is essential to Nielsen, and what better way to achieve this than to shield them from tax?

An emerald worth $1.5 billion

Nielsen Holding and Finance BV, known as H&F, is a Dutch-based holding company placed near the top of the group’s corporate structure. On December 31, 2010, H&F and The Nielsen Company (Luxembourg) lent each other $1.5 billion. The two debts were an exact mirror of each other: same promissory note format, same 8.3 per cent interest rate.

On the same day, the Luxembourg company transferred (“assigned”) the debt owed by H&F to The Nielsen Company Finance (Ireland), an Irish subsidiary it had formed a few months earlier. In exchange, the Irish company borrowed an equivalent $1.5 billion from its Luxembourg parent. Under this profit-participating facility agreement (PPFA), The Nielsen Company Finance (Ireland) agreed to pay all its annual profits except $50,000 to The Nielsen Company (Luxembourg) under the form of interest.

Still on the same day, the Irish company used its newfound wealth to loan $1.5 billion to TNC (US) Holdings Inc, a high-level holding company for many of Nielsen’s American companies.  This is the Emerald loan. The 10-year debt carried the same 8.3 per cent interest rate, which was reported to be at “arm’s length”. Technically, The Nielsen Company Finance (Ireland) lent this sum by way of transferring to TNC (US) Holdings the receivables it held from H&F.

One month later, as the group’s parent completed its IPO in New York, H&F and The Nielsen Company (Luxembourg) triggered the next “Emerald Project” transactions. They added $10.5 billion to the Luxembourg company’s reserves, mostly under the form of a transfer in the ownership of VNU International BV, a key Dutch intermediary holding company. But H&F also gave its Luxembourg subsidiary the original $1.5 billion loan note it held against it. As a result, this debt was “extinguished”. 

Presumably, the corresponding liability initially attributed to H&F was also removed – although it is not possible to verify this because public accounts for the period are available neither from H&F, nor from TNC (US) Holdings, which ended up being transferred the H&F note from Ireland. The earliest accounts available from H&F cover 2014 and do not show any debt of this size on its balance sheet.

From 2011 onwards, H&F was never mentioned again in filings related to the Emerald loan. Meanwhile, TNC (US) Holdings started paying interest to The Nielsen Company Finance (Ireland). 

All this boils down to the fact that the $1.5 billion created on New Year’s Eve ten years ago and trickled to Ireland for lending to the US was paper money. There is no evidence that it was structured from new external debt raised anywhere else by Nielsen – at the time, the group was in fact de-leveraging. Its accounts at the global level show that any financing transactions in 2010 were to pay down or refinance existing debt. Of the $1.8 billion raised through the January 2011 IPO, $1.4 billion went towards debt reduction.

To lend to its US business, Nielsen simply created a liability against its own assets, cascaded it through Dutch, Luxembourg and Irish subsidiaries, then one month later, erased the source of it at the stroke of a pen.

Responding to a query from The Currency, a Nielsen spokesperson did not answer questions regarding the purpose of these debt transactions, any potential source of funding other than the paper moves above, or the choice of Ireland to originate the US loans.

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From 2011, interest-only payments on the Emerald loan kicked in from the US company to The Nielsen Company Finance (Ireland). They amounted to over $126 million for each of the first two years.

Then on September 20, 2013, Nielsen doubled the stakes. The Nielsen Company Finance (Ireland) lent another $624 million to TNC (US) Holdings at 8.1 per cent – a deal known as the Fred 1 loan. On the same day, the Irish company also extended the Fred 2 loan to another US-based group company, AC Nielsen Corporation, lending it $800 million at 8.3 per cent. (The Fred 1 loan was later reallocated from TNC (US) Holdings to AC Nielsen corporation without affecting the overall cross-border flows.)

By August 2015, TNC (US) Holdings and AC Nielsen Corporation had paid a total of $811 million in interest to The Nielsen Company Finance (Ireland). 

The Nielsen Company Finance (Ireland) in turn increased its profit-participating debt to its Luxembourg parent by a corresponding $1.4 billion, bringing it to a total of over $2.9 billion. The new debt may in part have been structured from external funding as the Luxembourg company raised $625 million in 5.5 per cent bonds on the same day – this, however, would cover less than half of the new loans made to the American business and leaves a comfortable interest rate margin.

Total interest payments to Ireland by the US companies increased to nearly $157 million in 2013 and $243 million in a full year in 2014. By August 2015, TNC (US) Holdings and AC Nielsen Corporation had paid a total of $811 million in interest to The Nielsen Company Finance (Ireland). The Irish company regularly remitted those sums to its Luxembourg parent under the PPFA, duly keeping its $50,000 contractual profit and paying the corresponding $12,500 in Irish corporation tax each year.

Just like the Emerald Project had launched days before Nielsen’s 2011 New York IPO, another major Irish-based debt reshuffle took place ahead of the inversion that saw Nielsen’s Dutch parent back into a UK company on August 31, 2015. The new group parent, London-registered Nielsen Holdings PLC, has been the one listed in New York stock exchange ever since. 

The previous Tuesday, August 25, saw a flurry of debt transactions between Ireland and Luxembourg. On that day:

1. The Nielsen Company Finance (Ireland) transferred the Emerald, Fred 1 and Fred 2 US loans to The Nielsen Company (Luxembourg) as full repayment for the PPFA.
2. The Nielsen Company (Luxembourg) in turn transferred the US loans to its immediate parent Nielsen Luxembourg SARL as repayment of share premium.
3. Nielsen Luxembourg acquired one $1 share in Nielsen Finance Ireland Ltd for $2.9 billion, paid by transferring the US loans to the newly formed Irish company. The value of the loans was credited to the share premium account of Nielsen Finance Ireland. 
4. Finally, Nielsen Finance Ireland transferred the US loans to The Nielsen Company (Luxembourg) against a $2.9 billion interest-free loan agreement.

Are you still following? The upshot was that Nielsen’s US business now owed its interest-bearing debt to the Luxembourg company at the origin of the Emerald project, which in turn owed $2.9 billion interest-free to a new Irish company. The reason for this swap was not reported.

From then on, The Nielsen Company (Luxembourg) became the company collecting interest from US companies. It has since reported over half a billion in such collections, bringing the total extracted from TNC (US) Holdings and AC Nielsen Corporation to more than $1.3 billion. This is equivalent to more than one third of the US-based operating profit posted by the group over the corresponding 2010-2017 period.

These interest charges reduced the pre-tax profit of Nielsen’s US companies and channelled the funds through Ireland, where they merely transited – until they resurfaced further up the group’s structures in Luxembourg, the Netherlands and the UK.

As financial flows from multiple subsidiaries merged in holding companies, it was not possible to isolate where and how exactly US profits shifted to Europe through the Emerald and Fred loans were taxed. However, we know that corporate taxation was consistently lower in the jurisdictions concerned than in the US. 

Although The Currency was not able to access separate accounts for the two US companies, we can see the effect of these financial flows in consolidated figures published at group level. Ever since 2010, Nielsen has been listing “the favourable effect of financing activities” among the factor contributing to a reduction in its effective tax rate. 

How much has this “favourable effect” contributed to reducing Nielsent’s tax bills since 2010? Some $454 million, its accounts tell us (although it is not possible to establish how much of this is directly attributable to the Emerald and Fred loans).

At the end of 2017, US President Donald Trump signed the Tax Cuts and Jobs Act (TCJA) into law. The legislation had a major impact on the taxation of American corporations, especially those with an international reach. The US federal corporate income tax rate was cut from 35 to 21 per cent. As previously reported in the case of US-based technology multinationals, generating profit overseas from intellectual property became the most tax-efficient way to do business for many firms under the new Global Intangible Low-Tax Income (GILTI) regime, and many rushed to move such intangible assets to Ireland.

The TCJA also introduced a new Base Erosion and Anti-abuse Tax (BEAT) to deter large US firms from shifting profit to group companies in lower-tax overseas jurisdictions through intercompany charges. This is precisely what the Emerald project was set up to do, and the US tax authority suddenly regarded the hundreds of millions extracted as interest under the Emerald and Fred loans as taxable in the US.

Foreign earnings awaiting repatriation (and taxation) in overseas subsidiaries of US multinationals also became liable to a once-off reduced-rate tax charge.

The enactment of the new US tax rules on December 22, 2017 initially caught Nielsen in a bad position, one week before it closed its accounts for that year. The group immediately booked a $104 million provision for the effects of the TCJA, which saw its effective tax rate shot up to 47 per cent that year. 

The following year, however, it reversed this position by booking a $228 million tax benefit in respect of the TCJA’s impact, resulting in a negative 21 per cent effective tax rate. By then, the US Internal Revenue Service had had time to clarify the new rules, Nielsen’s accountants to check their sums and its lawyers to make the necessary changes to group structures.

Such changes started before the TCJA was introduced. On September 28, 2017, the board of The Nielsen Company (Luxembourg) approved a proposal to “fully reimburse” the $2.9 billion loans to US group companies. This doesn’t mean the debt was cancelled – instead, “these loans were assigned to Nielsen Finance Ireland Ltd as consideration for the repayment of the interest-free loan that the company, as borrower, had entered into with Nielsen Finance Ireland Ltd, for the same principal amount,” the Luxembourg company reported.

The Emerald and Fred loans were back in Ireland. Upon receipt of these debt assets, Nielsen Finance Ireland immediately placed them in its newly formed Irish subsidiary Nielsen Finance Ireland Holdings Ltd in exchange for two $1 shares. The value of the loans was credited to the Holdings subsidiary’s share premium account. This was the last reported movement of the Fred 1 and 2 loans totalling $1.4 billion.

On December 20, 2018, Nielsen Finance Ireland Holdings reduced its capital by taking $2.9 billion out of its share premium account and designated it as realised profit. On January 1, 2019, it paid $1.3 billion of this as a dividend to Nielsen Finance Ireland, who in turn paid the same dividend to Nielsen Luxembourg the same day. Through the rest of 2019, the same dividend flow, up the Irish holding structure and on to Luxembourg, was repeated twice: once for $101 million, and once for $1.5 billion, bringing the total repatriation out of Ireland to $2.9 billion. 

The Emerald loan was still alive earlier this year, as reported in a note to Nielsen Luxembourg’s latest accounts signalling the “returning” of the asset to Luxembourg from the company’s Dubai branch on January 27.

Also in 2019, on April 4, Nielsen Finance Ireland assigned the Emerald loan to Nielsen Luxembourg for an amount of $1.5 billion. All assets associated with the Emerald Project were by then cancelled out of Ireland and Nielsen Luxembourg was the last group company to report collecting interest on the Emerald loan, worth $92 million in 2019. The Emerald loan was still alive earlier this year, as reported in a note to Nielsen Luxembourg’s latest accounts signalling the “returning” of the asset to Luxembourg from the company’s Dubai branch on January 27.

The hollowed-out Irish companies were by then ready for liquidation, having originated the $2.9 billion paper debt owed by Nielsen’s US business, participated in a decade of successive asset transfers of and facilitated the tunnelling of over $1.3 billion in American profit under the Atlantic until it came up for air in lower-tax Benelux jurisdictions.

In answer to The Currency’s questions, the Nielsen spokesperson gave the following statement: 

“In the midst of divesting our mostly international Connect business (a presence in ~100 countries, approximately 70% international), the Irish entities, which had been a part of our overall global footprint for many years were no longer as relevant. 

Nielsen’s surviving Global Media business has a far more limited presence in Ireland and we are therefore able to simplify our structure. Ireland is one of several markets where we are liquidating entities and simplifying our structure as a result of the sale of the Global Connect business.”