(Bloomberg) — Japan’s Norinchukin Bank offered a higher premium to sell its first dollar bond since the agricultural lender earlier this year flagged massive losses on its investments in overseas bonds.
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Its $500 million five-year green bond priced Tuesday at 1.23 percentage points above Treasuries, after initial discussions of a spread around 1.55 points, according to a person familiar with the matter who asked not to be identified. Norinchukin issued similar notes in March 2023, and the spread then was 1.1 points.
Spreads have narrowed by 0.4 percentage point for Asia ex-Japan investment grade dollar bonds over those 19 months, according to a Bloomberg index.
The fair value of Norinchukin’s new bonds was a spread of around 1.15 percentage points, Bloomberg Intelligence credit analysts Pri De Silva and Adrian Sim wrote in a note Monday, citing the overhang from its securities-portfolio restructuring and related losses.
Proceeds from the new bond will primarily be used to finance or refinance environmental-related projects as defined in the bank’s sustainable-bond framework. A representative for JPMorgan Chase & Co., the lead bookrunner and green structuring agent, didn’t respond to a request for comment.
Japan’s largest agricultural bank, commonly known as Nochu, warned in June it might post a loss of ¥1.5 trillion ($10 billion) for the year ending in March due to impacts from investments in US and European government bonds. The firm is selling off more than $60 billion of those notes, and Nochu’s first quarter loss was ¥413 billion.
The bank’s dollar-bond spreads jumped when Nochu first highlighted the bond losses in May. But they’ve narrowed recently as the company raises capital and dollar-bond premiums globally have tightened.
Nochu is rated A by S&P Global Ratings, the sixth-highest grade, and A1 by Moody’s Ratings, the fifth highest. Both have a negative outlook on the debt score.
The deal was one of four Tuesday in the US investment-grade market.
–With assistance from Ameya Karve.
(Updates with credit ratings in second-to-last paragraph)
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