Nidec Components Draw Bond Investors Avoiding Sony: Japan Credit

Japan’s top-rated electronics companies are tapping the lowest borrowing costs in 15 months even as bond investors shun flagship issuers including Panasonic Corp. (6752) and Sony Corp. (6758)

Nidec Corp. (6594), the world’s biggest maker of hard-disk drive motors, paid less than half the spread of Japanese corporates in its first sale of non-convertible bonds last week, while copier maker Fujifilm Holdings Corp. (4901) also plans a debut. Yield premiums on companies rated AA- to AA+ have narrowed four basis points since September to 31 basis points, the least since August 2011, Bank of America Merrill Lynch indexes show. The average on Japanese corporate debt rose 6 to 49 during the period, while that globally narrowed 14 to 158.

Component makers such as Nidec, which also supplies camera shutters and vibrators for smartphones, are able to remain profitable even as Apple Inc. and Samsung Electronics Co. unseat Japanese companies as leaders in consumer electronics. By contrast, Panasonic, whose plasma TVs and appliances symbolized the country’s economic prowess, was downgraded by Standard & Poor’s and Moody’s Investors Service by three levels this year.

“Consumer electronics makers are struggling because of the decline in the global competitiveness and strong yen, but business-to-business companies have been stable,” Yasuaki Kudamatsu, senior credit analyst at Mitsubishi UFJ Morgan Stanley Securities Co., said in a telephone interview from Tokyo. “Nidec benefits from an overwhelming share in, and control of, their market.”

Bond Debuts

Kyoto, Japan-based Nidec offered 100 billion yen ($1.26 billion) in a three-part deal last week, pricing five-, seven- and 10-year bonds at a spread of 19 basis points more than similar-maturity government debt, according to data compiled by Bloomberg.

Fujifilm hired Daiwa Securities Group Inc., Nomura Holdings Inc. and SMBC Nikko Securities Inc. for the planned bond sale, SMBC Nikko said on Nov. 5. The offering will be the Tokyo-based company’s first sale of straight bonds, according to data compiled by Bloomberg.

Japan’s Rating and Investment Information Inc. ranks Nidec A+, its fifth-highest investment grade, according to the data. Fujifilm is rated Aa3 by Moody’s and AA- by S&P, or the fourth- highest level at both risk assessors, the data show.

New Leaders

“Apple and Samsung have been in the lead in information technology, so Nidec now makes motors for the iPhone,” Kudamatsu said. “Investors also valued Nidec’s strategy to raise sales for less volatile markets such as car-mounted and industrial devices.”

Elsewhere in Japan’s credit markets, Kansai Electric Power Co. is considering a 300 billion yen loan from as many as five banks, two people familiar with the matter said yesterday. Mizuho Corporate Bank Ltd. is arranging the deal and may be joined by Bank of Tokyo-Mitsubishi UFJ Ltd., Development Bank of Japan, Sumitomo Mitsui Banking Corp. and Japan Bank for International Cooperation, the people said.

Norinchukin Bank set up a 500 billion yen fund for acquisition and overseas expansion lending to Japanese food and medical companies operating in Asia, the company said on its website yesterday. The loans will range from one to 10 year and will come in amount of at least 100 million yen, it said.

The yen fell 0.1 percent against the dollar to 79.51 at 9:51 a.m. in Tokyo today. The Japanese currency has weakened 4.7 percent this year, the biggest decliner among the 10 developed- nation peers tracked by Bloomberg Correlation-Weighted Indexes.

Sovereign Yields

Japan’s benchmark 10-year government bond yields rose half a basis point to 0.735 percent as of 9:58 a.m. in Tokyo today. The rate was 86 basis points less than yields on similar maturity U.S. Treasuries, compared with 108 basis points a year earlier. One basis point is 0.01 percentage point.

Japan’s corporate debt is set for its worst monthly return in a year, led by a drop in Panasonic’s bonds, Bank of America Merrill Lynch index data show. The gauge has lost 0.22 percent this month, compared with a 0.36 percent gain for companies worldwide, the data show.

Panasonic debt declined 7.87 percent this month, followed by Kansai Electric handing investors a 1.2 percent loss, while Sony’s notes dropped 0.89 percent, the index data show.

Rating Cuts

“The secondary market is really terrible now,” Tadashi Matsukawa, who oversees the equivalent of $1.7 billion as head of fixed-income securities at PineBridge Investments Japan Co., said in a telephone interview from Tokyo yesterday. “Power company bonds are being sold as well as Panasonic’s. Two or three years ago, these were regarded as very solid.”

S&P reduced Panasonic’s rating to BBB, two levels above junk, or non-investment grade, saying in a Nov. 2 statement that the TV maker’s recovery to profitability will be slow. Moody’s put the company’s Baa1 ranking, its third-lowest investment grade, on negative watch a day earlier, according to data compiled by Bloomberg.

Moody’s also cut Sony’s rating one level to Baa3 on Nov. 9, citing falling demand for its televisions and cameras. The downgrade is the third by the risk assessor this year and ranks Sony’s debt one level above junk, data compiled by Bloomberg show.

Panasonic, Japan’s second-biggest television maker, projected on Oct. 31 a net loss of 765 billion yen for the year ending March 31, reversing its previous outlook for a 50 billion yen profit. That prompted the company to skip a dividend for the first time since 1950 because of an “urgent need” to improve its financial position.

Life After TV

Sony and Panasonic are struggling to make their television operations profitable amid competition from South Korean TV makers Samsung and LG Electronics Inc. Hitachi Ltd. chose to shutter its TV business and focus on power stations has helped as part of a turnaround from a record loss three years ago. The company last month forecast a 200 billion yen profit this fiscal year.

Nidec expects its profit to rise 23 percent to 50 billion yen this fiscal year as sales climb 5.5 percent, the company forecast on Oct. 24. The motor maker announced in September plans to buy U.S.-based Kinetek Group Inc. and Avtron Industrial Automation Inc., saying the acquisitions will help boost revenue and improve operating margins.

Deal Pipeline

Morinaga & Co. plans to sell 10 billion yen of five-year bonds, according to a Nov. 12 statement from SMBC Nikko, one of the managers. The sale by the company, rated A- by Japan Credit Rating Agency Ltd., its fourth-lowest investment grade, would be the confectionery products maker’s first notes since 2000, data compiled by Bloomberg show.

Daikin Industries Ltd. (6367), the world’s largest air-conditioner maker, is preparing to offer bonds in three tranches next month, according to a Nov. 5 statement from Daiwa.

Lixil Group Corp., an aluminum housing materials maker, also plans to tap the bond market through a two-part offering, according to a Nov. 6 statement from Nomura, one of the three managers. Sales by Daikin and Lixil, both rated AA- by JCR, would both be their first since 2009, data compiled by Bloomberg show.

“Investors are becoming more cautious and selective,” Hajime Suwa, the head of debt capital markets at Mitsubishi UFJ Morgan Stanley Securities, this year’s biggest underwriter of Japan’s corporate bonds, said in a telephone interview from Tokyo Nov. 12. “Even high-grade issuers can be downgraded all at once, so investors look carefully into individual companies before investing.”

To contact the reporter on this story: Yusuke Miyazawa in Tokyo at ymiyazawa3@bloomberg.net

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

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