Covering all the bases
As Japanese investors stepped up their search for yield, one house excelled at matching international issuers with local buyers. For its leading role in developing the Samurai and global yen markets, Mitsubishi UFJ Morgan Stanley Securities is IFR’s Yen Bond House of the Year.
Japan’s push to stimulate economic growth kept yen rates pinned to the floor in 2015, stoking demand for higher-yielding assets among the country’s conservative investor base. Mitsubishi UFJ Morgan Stanley Securities seized the opportunity to introduce new structures and first-time issuers to the yen market, doing the most among its peers to raise the currency’s global profile and deepen liquidity at home.
MUMSS arranged three of the four debut international issues in yen during IFR’s review period, more than any of its rivals. It also brought global borrowers back to the yen market after a long absence, deepened the Pro-Bond market, introduced loss-absorbing senior bonds to Japanese investors for the first time, and helped develop the market for Basel III bank capital.
The collaboration between Mitsubishi UFJ Financial Group, Japan’s largest bank, and US investment bank Morgan Stanley leaves MUMSS uniquely placed to match overseas issuers and Japanese investors. It covered all the bases during IFR’s review period, bringing global issuers to the euroyen, Global yen, Samurai and Pro-Bond markets.
“This has been one of the biggest years for international yen volumes,” said Noriaki Nomura, managing director of debt capital markets at the joint venture. “We drive to bring as many global issuers to the yen market as possible, as that allows Japanese investors to diversify their investments.”
The most significant yen debut of the year came from US giant Apple, which hired Mitsubishi as one of two leads for a ¥250bn (US$2bn) global offering, priced in early June. The five-year SEC-registered global, easily the biggest debut offering in the currency, was priced at the tight end of guidance flat to offer-side yen swaps – the traditional floor for core Japanese investors.
Global investors also participated, lured by an attractive pick-up over Apple’s dollar curve after swaps, but Double A rated Apple targeted Japanese buyers, allocating around 90% of the deal to Japanese banks, insurers and regional investors that were looking for a safe alternative to their holdings of Japanese government bonds.
The deal met Apple’s objectives in diversifying its investor base and funding its share buyback programme. For the wider market, however, it helped bring the yen to the attention of other global issuers, showing that top issuers could find both size and diversification in the currency.
MUMSS had already set that train in motion, arranging a ¥100bn global yen offering from consumer giant Procter & Gamble less than two months earlier.
After Apple’s debut, MUMSS targeted other North American issuers, winning lead roles on Bank of Nova Scotia’s first Pro-Bond – also its first yen offering since 2007 – and Royal Bank of Canada’s first Samurai issue since 2008.
“It’s tempting to look at Apple as a one-off because of its scale, but this is a deal that really made others think,” said Nomura.
MUMSS was also instrumental in another landmark debut, the ¥150bn Samurai offering from UK-based lender Standard Chartered. The three-part trade, the result of over a year of preparation, marked the biggest debut Samurai since the Lehman Brothers crisis and could have been even bigger, with total orders reaching ¥210bn.
StanChart issued at the holding company level, requiring Japanese investors to become comfortable with risks around pending rules on global banks’ total loss-absorbing capacity. MUMSS followed that up with Barclays’ first Samurai at the holding company level in September, raising ¥60bn.
As the world’s biggest banks step up their issuance of senior debt to meet total loss-absorbing capacity requirements, the sign that Japan’s conservative investor base is warming to new international names is a significant step.
Other issuers preferred the quicker Euroyen format, where MUMSS worked with Morgan Stanley’s international business to help Banco de Credito e Inversiones make its debut with a ¥16.5bn Euroyen issue in November 2014. Scotiabank’s Pro-Bond and a repeat issue from ING also showcased MUMSS’s commitment to developing Japan’s professional-only market.
MUMSS also played its part in developing the market for subordinated bank capital, where higher risk weightings and loss-absorption language mean the biggest Samurai investors have yet to get involved. It managed a ¥43.6bn Tier 2 offering from Societe Generale in June, as well as an intricate ¥139.9bn six-tranche trade for Credit Agricole that was the first to combine both senior and subordinated notes in a single issue.
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