Bloomberg News

Goldman Said to Delay Samurai Bond on Downgrade Review

February 20, 2012

(Updates with amount of Samurai sales in third paragraph, analyst comment in fourth.)

Feb. 17 (Bloomberg) -- Goldman Sachs Group Inc. delayed its first sale of Samurai bonds in four years after Moody’s Investors Service placed the bank under review for downgrade, according to a person with direct knowledge of the matter.

Goldman Sachs pushed back the offering, which may have been as early as today, to at least Feb. 21, the person said, asking not to be identified because the information is private. The brokerage told investors it plans to raise the size of the sale to at least 60 billion yen ($759 million), from 50 billion yen, and will widen the proposed yield premium, the person said.

The five-year sale would make it the busiest start to the year on record for the market for yen-denominated notes issued by overseas borrowers, according to data compiled by Bloomberg. A taxation rule change next month may make it more difficult for U.S. borrowers to sell Samurai bonds. Moody’s said Goldman Sach’s rating may be cut by two grades, which would lower it to A3, the seventh-highest level.

“Japanese investors have strong faith in Goldman Sachs, so they will buy the bonds,” Hiroaki Fujioka, a senior credit analyst at Daiwa Securities Capital Markets Co., said in a telephone interview from Tokyo. “But they may be downgraded to the bottom of the ’A’ range, which means after that investors need to consider the risk of a reduction to triple B. That’s why they increased the spread.”

Hiroko Matsumoto, a spokesman for Goldman Sachs in Tokyo, declined to comment on the Samurai bond sale.

The offering is being managed by Goldman Sachs’ Japanese unit, according to a Feb. 15 filing with the finance ministry.

Yield Premium

The firm is marketing the notes to yield between 195 basis points and 210 basis points more than the yen swap rate, having previously targeted a range of 170 basis points to 195 basis points, the person said.

The Samurai sale also includes floating-rate notes, of the same maturity, yielding between 210 basis points and 225 basis points more than the three-month London interbank offered rate for yen, according to the person.

“Capital markets firms are confronting evolving challenges, such as more fragile funding conditions, wider credit spreads, increased regulatory burdens and more difficult operating conditions,” Moody’s said in a statement. Goldman Sachs is among 17 banks and securities firms that Moody’s placed under review for downgrade.

Goldman Sachs last sold Samurai bonds in January 2008, raising 148.5 billion yen, including 18.3 billion yen of five- year, 2.11 percent bonds priced to yield 110 basis points more than the yen swap rate, according to data compiled by Bloomberg.

Busiest Market

A 60 billion-yen sale by Goldman Sachs would bring issuance this year to 497 billion yen, the most since at least 2001, according to data compiled by Bloomberg.

Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden NV, the Dutch development finance company known as FMO, also plans to offer 20 billion yen of five-year notes as early as Feb. 22, a person with direct knowledge of the matter said today.

FMO, which has a top AAA rating from Standard & Poor’s, told investors it will price the bonds to yield between 35 basis points and 37 basis points more than the yen swap rate, said the person, asking not to be identified as the information is private. Daiwa Securities Group Inc. and Mizuho Financial Group Inc. are helping FMO sell the bonds, the person said.

--Editors: Beth Thomas, Katrina Nicholas

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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