By Michiyo Seki
TOKYO -- General Electric Capital Corp. saw good demand for its 85 billion yen ($790 million) Samurai-bond offering, suggesting credit-market jitters haven't affected the market for top-rated debt.
"GECC issues seem to have been hugely popular among Japanese investors," said Yusuke Ueda, Japan credit strategist at Credit Suisse First Boston. "At least for GECC, there was no negative impact" from recent unrest in global credit markets, he said.
The triple-A-rated financial arm of General Electric /zigman2/quotes/208495069/composite GE +1.24% Co. offered 45 billion yen of five-year Samurai bonds with a coupon of 0.665%, 20 billion yen of seven-year bonds with a 1.04% coupon and another 20 billion yen of 10-year bonds with a 1.545% coupon. Samurai bonds are yen-denominated bonds issued in Japan by foreign borrowers.
"The deal effectively marks the reopening of the Samurai sector as it is the first sizable Samurai transaction of this fiscal year," joint lead managers Mitsubishi Securities, Mizuho Securities and Nomura Securities said after the launch.
All tranches were priced at the tight end of the marketing ranges, underlining the strength of demand that came from a broad range of institutional investors in Japan, the lead managers said. The five- and seven-year segments were sold mostly to regional investors, while those in the Tokyo area were major buyers of the 10-year tranche, they said.
GECC last tapped the Samurai market a year ago with five- and 10-year issues. The spread on the latest five-year issue shrank to 0.07 percentage point over the yen London interbank offered rate, from 0.09 percentage point last year, while the 10-year spread narrowed to 0.17 point from 0.25 point.
An official at Mitsubishi Securities said GECC's bonds were best suited to reopen the Samurai-bond market, which was somewhat dented by credit concerns that surged overseas.
" We set the timing of the launch and spread levels with caution while monitoring the impact [from overseas markets] on the Samurai market," the official said. "GECC, with its top-notch credit ratings and widely known name, was the best issuer to reopen the market," he said.
GECC's bonds were assigned triple-A by Moody's Investors Service and triple-A by Standard & Poor's.
Corporate-bond spreads widened globally in mid-March when General Motors /zigman2/quotes/205226835/composite GM -1.38% Corp. shocked market participants with its weak earnings forecast. Concerns about credit products heightened in early May when Standard & Poor's downgraded debt ratings for GM and Ford Motor /zigman2/quotes/208911460/composite F -1.71% Co. to "junk," or subinvestment-grade, status.
The Samurai-bond market hasn't been free from rapid widening of credit spreads overseas. Spreads on Samurai bonds issued by General Motors Acceptance Corp. and Ford Motor Credit Corp., the auto makers' financing arms, shot up, with GMAC's Samurai spread briefly widening to more than five percentage points over Libor, compared with one percentage point a year earlier, traders said.
While this drove up spreads on Samurai issues like Volkswagen International Finance, however, spreads on other issues stood relatively calm overall, CSFB's Mr. Ueda said.
Samurai bonds will continue to attract yield-hungry investors in Japan, as Samurai issuers usually pay higher spreads than Japanese companies with similar credit ratings, due to lower liquidity of such bonds than domestic issues. In fact, despite receiving the highest credit ratings from international credit-ratings firms, GECC paid more lucrative spreads on its bonds than Japanese companies with lower credit ratings.
The spread on GECC's seven-year bonds was 0.11 point over Libor, more than 0.08 point than that of Japan's Kikkoman /zigman2/quotes/200008494/delayed JP:2801 -0.56% Corp., rated single-A by Rating & Investment Information, paid on its seven-year bonds early this month.
More Samurai bonds are expected to be offered in Japan in coming months. Poland in late April selected Daiwa Securities SMBC and Nomura Securities to jointly lead manage a coming Samurai issue. It expects to raise around 50 billion yen through a five- to seven-year issue. Nomura also is lead managing Thailand's 48 billion yen of three-year Samurai bonds set to be launched in June.
Write to Michiyo Seki at firstname.lastname@example.org