Bloomberg News

Kansai Electric Postpones Bond Issue Amid Nuclear Disaster

June 09, 2011

(Adds company comment in seventh paragraph.)

June 9 (Bloomberg) -- Kansai Electric Power Co. postponed a sale of 10-year bonds after relative yields on the debt of Japanese utilities surged to a record amid the worst nuclear crisis since Chernobyl.

It pulled the deal because of “market conditions that changed rapidly,” according to an e-mailed statement from Nomura Securities Co., which was arranging the issue with four other banks. Osaka-based Kansai Electric had planned to sell about 20 billion yen ($250 million) of notes next week, said a person with direct knowledge of the matter.

Japanese power producers haven’t sold bonds since March 11 when a magnitude-9 earthquake and tsunami crippled Tokyo Electric Power Co.’s Fukushima Dai-Ichi nuclear plant. Spreads on bonds sold by the nation’s utilities widened to a record 172 basis points more than similar-maturity government debt yesterday, from 12 basis points a day before the quake, according to Bank of America Merrill Lynch data.

“It may be difficult for power producers with nuclear plants to sell bonds until about September,” said Hisayoshi Nogawa, a structured credit strategist at BNP Paribas Securities Japan Ltd. in Tokyo. “Loans would be cheaper.”

Kansai Electric last sold debt on Dec. 2, when it raised 30 billion yen from an issue of 10-year, 1.285 percent bonds that were priced to yield 9 basis points more than Japanese government debt, according to data compiled by Bloomberg. The spread on the securities widened to a record 32 basis points today from 12 basis points on March 10, according to Japan Securities Dealers Association prices on Bloomberg.

Debt Insurance

Credit-default swaps insuring the company’s debt against non-payment more than doubled today to 177 basis points, according to CMA.

“The market conditions have become very fluid,” said spokeswoman Tomoe Sugimori. “Under such circumstances, we thought it would be difficult for investors to make appropriate judgments, so we decided to postpone the bond sale.”

Nomura, Daiwa Securities Capital Markets Co., SMBC Nikko Securities Inc., Mizuho Securities Co., and Mitsubishi UFJ Morgan Stanley Securities Co. were hired to manage Kansai Electric’s bond sale.

--With assistance from Shunichi Ozasa in Tokyo. Editors: Ed Johnson, Paul Armstrong

To contact the reporters on this story: Yusuke Miyazawa in Tokyo at ymiyazawa3@bloomberg.net Taku Kato in Tokyo at tkato6@bloomberg.net

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


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