Scandal Wipes a Third of Kobe Steel's Value in Two DaysBy
Domestic buyers see shares tumble amid false data scandal
Bond premiums, default protection costs at Kobe also surge
The impact of the scandal at Kobe Steel Ltd. is gathering pace.
Leading customers from Shinsho Corp. to Mitsubishi Corp. have been sucked into Kobe’s false product data debacle, triggering outsized moves in debt, credit and equity securities associated with Japan’s third-largest steelmaker by output and sales.
More than a third has been wiped from Kobe Steel’s stock-market value, in a record two-day slide.
Kobe Steel disclosed Sunday that its staff had falsified data about the strength and durability of some aluminum and copper products, and said Wednesday that iron ore powder data may also be suspect. While JPMorgan securities Japan Co. estimates the cost of replacing the parts could be as much as 15 billion yen ($133 million), the reputational cost and potential lawsuits stemming from the disclosures could cost Kobe Steel far more.
Bond yield premiums at the steelmaker have also jumped to records, with the spread on notes due November 2021 jumping 148 basis points to about 202.5 on Tuesday, according to data compiled by Bloomberg. The cost of buying protection against a default for Kobe has also surged, jumping more than 180 basis points to a 19-month high for five-year swaps, the data show.
Shares of Kobe Steel’s top customers, based on their contribution to the steelmaker’s revenue, are starting to sink. Shinsho, Kobe Steel’s biggest customer by sales, is down 25 percent this week while Mitsubishi has lost some $780 million in value. Toyota Motor Corp., the No. 3 buyer, also slipped.
For now, investors in overseas customers of Kobe Steel are less worried. General Motors Co. and Ford Motor Co. -- rounding out the top five buyers of the company’s products -- are up about 0.6 percent for the week, with General Motors touching a record Oct. 9 after Kobe’s initial disclosure.
Boeing Co., which uses wings from affected supplier Subaru Corp. in jets including the Dreamliner, said it is checking its supply chain and has found no safety concerns so far. The aircraft manufacturer’s stock climbed 1 percent to a record Tuesday.
— With assistance by Livia Yap, and Andrew Monahan