Teijin Ltd. (3401), Japan’s second-largest synthetic fiber maker, is planning its first U.S. dollar- denominated syndicated loan to take advantage of the lower cost of swapping greenback proceeds into yen.
The company plans to raise 30 billion yen ($385 million) this week, split between dollar- and yen-denominated loans from lenders including Bank of Tokyo-Mitsubishi UFJ Ltd. and Mizuho Corporate Bank Ltd., Chief Financial Officer Yoshihisa Sonobe said Sept. 21 in an interview. The funds will be used to repay a yen facility maturing this month, Sonobe said.
Teijin, whose fibers are used in products ranging from bulletproof vests to Airbus SAS’ A380 superjumbo, may seek more loans or sell corporate bonds ahead of schedule to help pay for 100 billion yen it plans to spend each year on capital investments and acquisitions, Sonobe said. The five-year swap rate averaged minus 76 basis points this year, compared with minus 59 in 2011 and minus 39 the year before that, data compiled by Bloomberg show.
“The cost of financing is at a historical low,” Sonobe said. “Our midterm business plan calls for a sizable increase in investments and we are working on a financing structure for a steady supply of funds.”
Borrowers typically use cross-currency basis swaps to exchange floating-rate payments in one currency to another. The Japanese yen basis swap measures the cost of switching interest charges pegged to the dollar London interbank offered rate, or Libor, for rates linked to yen Libor.
The fiber manufacturer paid 0.9 percent on its long-term debt last fiscal year ended March 31, compared with 2.1 percent in the period to March 2008, according to company filings. Teijin had 254.7 billion yen of interest-bearing debt as of the end of June, the company said in a statement last month.
The borrowings include a 30 billion five-year term loan maturing Sept. 27, according to data compiled by Bloomberg. That facility was priced to pay 5.5 basis points more than Libor, the data show.
The Osaka-based company said in August spending on factories and equipment will increase 55 percent to 50 billion yen this fiscal year ending March 2013. Teijin’s mid-term business plan unveiled in February calls for investments in health care operations, such as pharmaceuticals and home nursing care, and carbon fibers and composites, the lightweight materials used in cars and golf club shafts.