Syndicated loans in Japan jumped 12 percent to the highest in four years in the first half aided by demand for acquisition funds as companies sought to take advantage of the yen near postwar highs to expand overseas.
Lending increased to 15.1 trillion yen ($193 billion) in the six months ended June 30 from the same period a year earlier, the highest since 15.8 trillion yen in the first half of 2008, according to figures released today on the Japanese Bankers Association’s website. The outstanding balance of loans rose 7 percent to 59.8 trillion yen, the highest in at least eight years.
Takeda Pharmaceutical Co., whose 9.6 billion euro ($12 billion) acquisition of Swiss drugmaker Nycomed was the biggest overseas deal by a Japanese company last year, signed an 80 billion yen facility in March to help pay for the purchase. The average rate Japanese companies pay on new loans held below 1 percent for the second straight month in June, while rates on existing facilities dropped to a record low, the Bank of Japan said today.
“The exchange rate is prompting companies to consider expanding overseas which has resulted in increased demand for acquisition financing,” Takeshi Shibasaki, the chief strategist at Mizuho Securities Co. said by telephone today from Tokyo. “Interest rates at such a low level are also a draw for the companies.”
The yen was at 78.24 per dollar at 2:21 p.m. in Tokyo today. The Japanese currency climbed to a post-World War II record of 75.35 on Oct. 31. It has risen 5.8 percent in the past three months against a basket of nine developed-market peers, making it the best performer among the group, according to the Bloomberg Correlation-Weighted Index.
Japan’s average rate on new loans was 0.997 percent in June, holding below 1 percent for a second straight month, the BOJ said in a statement on its website today. Existing loan rates fell to a record low of 1.409 percent, it said.
Takeda Pharmaceutical is paying 1 basis point more than the three-month London interbank offered rate on the six-year portion of its 80 billion yen loan and matching the rate on its four-year part, data compiled by Bloomberg show.
Toshiba Corp. borrowed 150 billion yen from 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 0.505 percent, compared with a weighted average coupon of 1.29 percent Toshiba is paying on its outstanding bonds, according to data compiled by Bloomberg.
Overseas acquisitions by Japanese companies totaled $37.7 billion in the first half of 2012 compared with $42 billion the first half of 2011 and $48.6 billion the second half of 2011, data compiled by Bloomberg show.
Syndicated loan volumes in Asia-Pacific outside of Japan in the first six months to 2012 totaled $159.4 billion, a 29 percent decrease on the same period of 2011, according to data compiled by Bloomberg.
Loan volumes have been dropping as banks’ wholesale cost of funding increases and borrowers, faced with rising interest costs, postpone refinancing. Average interest margins for U.S. dollar loans in Asia outside of Japan rose to 270.8 basis points since Dec. 31 from 247.8 basis points the same period of 2011.
Sales of Japanese corporate bonds were little changed in the first six months from the same period a year earlier at 3.9 trillion yen, data compiled by Bloomberg show. Offerings rose 80 percent to 832 billion yen this month from June, bolstered by a return to the market of two nuclear utilities, the data show.
To contact the reporter on this story: Emi Urabe in Tokyo at email@example.com