(Bloomberg) — Japan’s Norinchukin Bank hired investment banks for its first potential dollar bond sale since the agricultural lender said it expects massive losses on its investments in overseas bonds.
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The bank will hold a series of investor calls across Asia, Europe and the US starting Monday for the sale of a five-year dollar-denominated green bond, according to a person familiar with the matter who asked not to be identified. The last time it sold such a bond was in March 2023, according to data compiled by Bloomberg.
Japan’s farm ministry said last month that a panel of outside experts will examine how Norinchukin, the country’s largest agricultural bank, found itself expecting to report a net loss of about ¥1.5 trillion ($10.1 billion) in the current fiscal year due to bond losses. Still, the lender is poised to take advantage of a global tightening in credit spreads after the Federal Reserve cut interest rates and US jobs data on Friday underscored the strength of the economy.
Spreads on Norinchukin’s dollar debt blew out after the bank said in May that it would raise capital to cover losses arising from its plan to dispose of low-yielding foreign bonds. Yield premiums on the lender’s 2028 dollar bond widened to 138 basis points in September from 75 basis points in mid-May, according to data compiled by Bloomberg.
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But the yield premium on the note narrowed to 122 basis points on Monday, according to data compiled by Bloomberg. Spreads on US high-grade bonds narrowed to their lowest in about three years on Friday, according to a Bloomberg index.
A spokesperson for Norinchukin declined to comment on the potential bond sale.
The Japanese bank said on Sept. 30 that it had issued ¥736 billion of low-dividend stocks and redeemed subordinated loans of ¥716.9 billion, according to a statement. Norinchukin is proceeding with measures to enhance its capital as previously announced, it added.
The bank posted a ¥413 billion loss in the quarter to the end of June, and is unwinding about $67 billion of US and European government bonds this fiscal year after making bad bets on interest rates.
The new equity issue will improve the bank’s Common Equity Tier 1 ratio and create a buffer against planned losses as it improves its investment portfolio, Moody’s Ratings said last month.
–With assistance from Ameya Karve and Taiga Uranaka.
(Adds company response in sixth paragraph.)
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