(Bloomberg) Japan’s Norinchukin Bank offered a higher premium for its first dollar-denominated bond sale since the agricultural lender posted huge losses on overseas bond investments earlier this year.
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The $500 million, five-year green bond was priced at 1.23 points above U.S. Treasuries on Tuesday, after initial talks pegged the spread at around 1.55 points, the people said, asking not to be identified. Norinchukin also issued a similar bond in March 2023, but the spread at that time was 1.1 points.
Spreads on investment-grade dollar-denominated bonds in Asia ex-Japan have narrowed by 0.4 percentage point over the past 19 months, according to Bloomberg Index.
Bloomberg Intelligence credit analysts Puri de Silva and Adrian Sim said in a Monday note that the fair value of Norinchukin Bank’s new bonds has a spread of about 1.15 percentage points, which is related to the restructuring of its securities portfolio. He cited overhang due to losses.
Proceeds from the new bonds will primarily be used to finance or refinance environmental projects as defined in the bank’s sustainable bond framework. Representatives for JPMorgan Chase, the lead bookrunner and green structuring agent, did not respond to requests for comment.
Japan’s largest agricultural bank, commonly known as Nochu, in June reported a loss of 1.5 trillion yen ($10 billion) for the year ending in March, due to the impact of investments in U.S. and European government bonds. I warned you that this is a possibility. The company sold more than $60 billion of those bonds, leading to Nochu’s first-quarter loss of 413 billion yen.
When Norinaka first pointed to bond losses in May, the bank’s dollar bond spreads soared. But that range has narrowed recently as the company has raised capital and dollar bond premiums have tightened globally.
Nochu is rated A1, the sixth highest rating, by S&P Global Ratings and A1, the fifth highest, by Moody’s Ratings. Both have negative outlooks on debt scores.
The deal was one of four in the U.S. investment-grade market on Tuesday.
–With assistance from Ameya Karve.
(Credit rating updated in penultimate paragraph)
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