Japan Syndicated Loans Post First Gain Since 2008

Syndicated loans in Japan rose for the first time since 2008 as companies sought bank debt for overseas expansion and utilities suspended bond sales following the Fukushima nuclear disaster.

Lending increased 23.5 percent to 28.7 trillion yen ($354 billion) in the year ended March 31 from the previous 12 months, according to figures released today on the Japanese Bankers Association’s website. The outstanding balance of loans rose 4 percent to 57.3 trillion yen, the highest in two years.

Toshiba Corp. and Takeda Pharmaceutical Co. led Japanese companies which relied on loans to finance a record $88.6 billion of overseas acquisitions last fiscal year, triple the previous period’s level, to counter stagnating domestic demand. NKSJ Holdings Inc., Japan’s third-largest non-life insurer, said earlier this month it will look to emerging markets as demand falls at home, while JFE Holdings Inc., the second-biggest steelmaker, plans to spend 500 billion yen offshore to grow faster than it can in a nation battling deflation and economic expansion that’s forecast to average less than 2 percent through 2014.

“Overseas acquisition-related investment is on the rise,” Takeshi Ueno, a senior economist at NLI Research Institute in Tokyo, said before the release of today’s data. “With the yen at historically strong levels, Japanese companies can make overseas acquisitions more cheaply, and counter reduced domestic demand.”

Bond Sales Fall

Loan volumes were also boosted by borrowings from power companies, which have been all but shut out of the bond market since last March’s record earthquake and tsunami killed more than 15,000 people and triggered a meltdown at Tokyo Electric Power Co.’s Fukushima Dai-Ichi plant.

Sales of Japanese corporate bonds dropped 16 percent last fiscal year to 8.3 trillion yen as debt offered by electrical utilities fell to 70 billion yen, less than 1 percent of the total, from 11 percent a year earlier, data compiled by Bloomberg show.

Takeda took out a 570 billion yen facility to help pay for its 9.6 billion euro ($13 billion) purchase of Switzerland’s Nycomed, making both the loan and the acquisition the country’s biggest last year, according to data compiled by Bloomberg. The Osaka-based company paid an interest rate of about 0.2 percent.

Takeda’s Loan

Asia’s biggest drugmaker signed an 80 billion yen facility in March, paying one basis point more than more than the three- month London interbank offered rate on the six-year portion and matching the rate on the four-year part, data compiled by Bloomberg show.

Sanofi SA, France’s largest pharmaceutical company, paid a 175 basis-point spread for a two-year loan and 90 basis points more than the benchmark on a four-year facility for debt to fund its acquisition of Genzyme Corp. last year, according to the data.

Toshiba borrowed 150 billion yen in syndicated loans arranged by Mizuho Financial Group Inc. and Sumitomo Mitsui Financial Group Inc. in January to pay for its July purchase of Swiss electronic-metering company Landis+Gyr AG.

The funding includes a four-year facility which pays a margin of 7.5 basis points more than the six-month Tokyo interbank offered rate. That’s equivalent to about 0.52 percent, compared with the average coupon of about 1.28 percent that Toshiba is paying on its outstanding bonds, according to data compiled by Bloomberg.

To contact the reporter on this story: Emi Urabe in Tokyo at eurabe@bloomberg.net

To contact the editor responsible for this story: Shelley Smith at ssmith118@bloomberg.net

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