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Marubeni Plans First Dollar Bonds Since 2006, Debt Risk Rises

Marubeni Corp., Japan’s biggest trader of agricultural commodities, is planning its first dollar-denominated bonds since 2006 as issuance in the Asia-Pacific region approaches a three-week high. Debt risk rose.

The company hired Citigroup Inc., Goldman Sachs Group Inc. and JPMorgan Chase & Co. to arrange fixed-income meetings from March 5, said a person familiar with the matter. Marubeni’s unit Mirant JPSCO Finance Ltd. last sold U.S. currency notes in June 2006. The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan rose 1 basis point to 108.5 basis points as of 3:04 p.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show.

Dollar bond offerings in the Asia-Pacific region reached $4.35 billion this week, nearing the highest since the five-day period to Feb. 1, according to data compiled by Bloomberg. Marubeni, rated two levels above junk by Moody’s Investors Service Inc. and Standard & Poor’s, is buying the U.S grain trader Gavilon Group LLC for $5.6 billion as incoming Chief Executive Officer Fumiya Kokubu targets a 50 percent increase in annual profit.

“The climate in the market for investment-grade issuers is getting very good, even for BBB ones like Marubeni,” Toshiyasu Ohashi, chief credit analyst for Daiwa Securities Co., said in a telephone interview from Tokyo today. “It would have been difficult for companies with Marubeni’s credit ratings to issue bonds overseas until recently.”

Marubeni’s Swaps

The cost to insure Marubeni’s debt against non-payment dropped 23 basis points this year to 121 basis points yesterday, reaching the lowest since May 2011 on Feb. 6, according to data-provider CMA. The decline is less than the 34 basis point drop for the benchmark Markit iTraxx Japan index during the same period.

Daiwa Securities Group Inc., Japan’s second-biggest brokerage, was the last similarly-rated Japanese borrower to issue dollar debt, with a sale of $67 million of notes on Nov. 15, data compiled by Bloomberg show. The bond matures in December 2017 and pays a coupon of 1.4 percent.

Moody’s rates Marubeni at Baa2 and S&P’s ranks it BBB, Bloomberg data show.

The Markit iTraxx Asia index, which has ranged from 102.8 to 120.3 since Dec. 31, is poised to decline for a fourth-consecutive week, according to data provider CMA.

The Markit iTraxx Australia index added 0.5 basis point to 115 as of 10:38 a.m. in Sydney, Westpac Banking Corp. prices show. The benchmark is set to increase for the first time in three days, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the private market.

The Markit iTraxx Japan index also rose 0.5 basis point to 125 as of 3:55 p.m. in Tokyo, according to Deutsche Bank AG prices. The measure, which started the year at 148.1, dropped for a fifth straight month in February, CMA prices show.

Credit-default swap indexes are benchmarks for insuring bonds against default and traders use them to speculate on credit quality. A drop signals improving perceptions of creditworthiness, while an increase suggests the opposite.

The swap contracts pay the buyer face value in exchange for the underlying securities if a borrower fails to meet its debt agreements.

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