Sole success
In another tough year for the international yen market, one bank stood out for its ability to not only bring challenging clients to the market, but to do so on a sole basis. The bank is SMBC Nikko, IFR's Yen Bond House of the Year.
With major central banks such as the US Federal Reserve and the European Central Bank still pumping lots of liquidity into their markets, foreign issuers like global banks generally continued raising funds mainly in their mother currencies and opting out of the yen market where investors remain highly selective.
But even when market conditions were not favourable for foreign issuers, SMBC Nikko kept the lines of communication open, preparing for their return to yen.
And the bank was not afraid to put itself forward as sole arranger, even for challenging deals.
"The more joint lead managers you have, the less easy it is to confirm everyone's intention and build consensus. But in a sole-led deal it is easier to connect an issuer's needs and investors' needs in the best possible way," said Hiroyuki Kinoshita, head of international DCM at Nikko.
Nikko did four sole-led deals in 2021, starting with Corporacion Andina de Fomento's ¥31.3bn (US$299m) three-part Samurai bonds in February.
The following month, Nikko sole-led the Philippines' three-year Samurai. That deal was a quasi-zero-coupon bond, a very unusual structure in the yen market, but Nikko knew the issuer wanted to sell the product and confirmed investor interest before making a proposal. Ultimately, the sovereign raised ¥55bn, more than its initial target of ¥30bn.
Perhaps the highlight was Renault's ¥150bn dual-tranche Samurai in June. Other banks thought it was too early for the automaker to return to the market, believing investors would avoid the trade because of the arrest of ex-Renault/Nissan boss Carlos Ghosn in 2018 on charges of financial misconduct. Nikko’s non-deal roadshows told a different story.
"Investors were concerned about headlines, and the issuer was concerned about investors' concerns, so we had the issuer answer investors' questions," said Kenichiro Nakahama, head of international debt syndicate at Nikko.
Nikko had kept Renault updated regularly during its absence from the market, and was rewarded with a sole lead manager mandate. The size of the deal matched the issuer's 2014 record sale.
The bank's last sole-led deal of the year was also unique. It assisted South Korean department store operator Lotte raise ¥8.5bn from a private placement of three-year Samurai bonds.
It was not easy for the unrated issuer to tap the yen market, but after an intense dialogue with the issuer about what was possible, Nikko introduced the credit to Japanese investors by obtaining a guarantee from Kookmin Bank.
Those deals helped to put Nikko on top of the league table. It underwrote ¥438.6bn, over ¥150bn more than its closest competitor.
Quick step
Nikko was not just a leader when it came to international borrowers. It also helped develop the domestic market when it shortened the marketing period of Takeda Pharmaceutical's 10-year bond sale. The lengthy marketing in the yen market is infamous and Nikko thought those old habits need to change, not least because a growing number of Japanese issuers have sold bonds in foreign currencies and become used to swift marketing processes offshore.
"The yen market needs to adopt global standards," said Tatsuo Shimmyo, head of domestic DCM at Nikko. "Otherwise, more Japanese corporate issuers will raise funds in the international capital markets."
As a bookrunner, Nikko shortened the marketing period to avoid market risk, and Takeda was still able to raise a hefty ¥250bn. The deal was highly praised by investors and foreign bankers who think the marketing period in Japan needs to be shortened.
Nikko was on other key domestic deals as well, such as Toyota Motor's woven planet sustainability bonds, Mitsubishi Corp's first Tonar-based hybrid bond, and NTT Finance's jumbo triple-tranche green bonds.
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