Bloomberg News

Tepco Said to Plan 370 Billion Yen Private Placement Bond Sale

May 18, 2012

Tokyo Electric Power Co. (9501) plans to sell as much as 370 billion yen ($4.7 billion) of private placement bonds, diluting the guarantees that back the utility’s about 4.3 trillion yen of publicly sold notes.

The facility will include 170 billion yen for refinancing of existing non-guaranteed debt and 200 billion yen in new funding, according to three people familiar with the matter. Tepco, as the company is known, expects to complete the transaction in July, the people said, declining to be identified because the details are private.

The deal is part of Tepco’s 1.7 trillion yen financing plan agreed on earlier this month under Japan’s 1 trillion yen bailout for the owner of the stricken Fukushima Dai-Ichi nuclear plant. Banks, whose loans supported Tepco after the March 11 disaster locked it out of the bond market, are offering low interest rate facilities to the utility in exchange for a repayment guarantee, the people said today.

“The sale may reduce the amount of collateral backing the company’s existing bonds and that will have to be reflected in its credit rating,” Hiroki Shibata, a Tokyo-based credit analyst who covers power producers for Standard & Poor’s, said in an interview yesterday. The offering may lead S&P to lower the utility’s B+ rating, he said.

Lenders will include Development Bank of Japan (8301), Sumitomo Mitsui Financial Group Inc. (8316) and the country’s major trust insurance companies, which will buy the securities and convert them to loans, the people said.

Bond Pricing

Tepco will sell 200 billion yen of 1 1/2-year securities and have a choice of six-month, five-, seven- and 10-year notes for the rest of the funding, the people said. The relative yields for notes with maturities of five years or more are still under negotiation and may range from 50 basis points to 60 basis points, they said.

“Regarding the detail of financings, such as interest rates and private placements, we are continuing to negotiate with financial institutions,” Tepco’s spokesman Taichi Okazaki said by telephone today.

The company has 4.3 trillion yen of bonds outstanding, including 499 billion yen due this year, according to data compiled by Bloomberg. The power company also has 3.72 trillion of long- and short-term loans that aren’t guaranteed, it said earlier this month.

The extra yield investors demand to own Tepco’s 1 billion euro of 4.5 percent notes due March 2014 is 533.1 basis points, down from the peak of 1,743.5 basis points on Oct. 19, BNP Paribas SA prices show. The spread on the company’s 150 billion yen of 4.75 percent notes due February 2014 is 490 basis points, down from a peak of 996 on Oct. 27, Japan Securities Dealers Association prices show.

To contact the reporter on this story: Emi Urabe in Tokyo at eurabe@bloomberg.net

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


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