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Nomura Retakes Top Bond Rank After Softbank Sale: Japan Credit

April 09, 2013

Nomura Retakes Top Bond Rank After Softbank Sale

A pedestrian walks near the Nomura Holdings Inc. headquarters, second right, in Tokyo. Shares of Nomura have more than doubled in the past five months as investors bet that fiscal and monetary stimulus designed to end deflation will spur fundraising and investing. Photographer: Kiyoshi Ota/Bloomberg

Nomura Holdings Inc. (8604) regained the top spot in Japan’s bond underwriter rankings as it mobilized a 177-branch network to help Softbank Corp. (9984) sell debt to households and the impact of an insider-trading scandal faded.

Japan’s biggest brokerage overtook Mizuho Financial Group Inc. in the three months ended March from the preceding quarter, increasing its market share to 29 percent of all issuances including its own, the most since 2008, data compiled by Bloomberg show. Bond sales in Japan fell 25 percent from a year earlier to 2.7 trillion yen ($27 billion), more than a 7.3 percent drop in the U.S., the data show.

“We used our entire branch network to sell the bonds to individuals, wealthy investors, schools and religious groups,” Masanori Azuma, head of debt capital markets at Nomura, said in an April 5 interview in Tokyo. He was referring to the 210 billion yen sale for wireless carrier Softbank, the largest corporate issuance Nomura underwrote in its 87-year history.

Government issuers that dropped Nomura last year amid revelations that employees had leaked information on equity offerings are once again selling bonds through the Tokyo-based firm. Shares of Nomura have more than doubled in the past five months as investors bet that fiscal and monetary stimulus designed to end deflation will spur fundraising and investing.

“Nomura is no longer lamenting the damage it suffered from last year’s insider scandals,” said Makoto Kikuchi, chief executive officer at Myojo Asset Management Co., a Tokyo-based hedge fund advisory firm. “It has marketing power and will keep boosting its share as more companies and agencies look to sell bonds amid falling long-term interest rates.”

‘Good Proposal’

Softbank offered the mandate to Nomura as “it submitted a good proposal at an early stage,” said Hiroe Kotera, a spokeswoman at the mobile operator. Tokyo-based Softbank, which introduced the iPhone to Japanese users, raised the funds after agreeing to buy Sprint Nextel Corp. for $20 billion.

The note was called the “Fukuoka Softbank Hawks Bond,” named after the phone company’s baseball team, and investors were given a bath towel with an imprint of a white dog, the mascot used in its television advertisements, Kotera said.

“The rankings illustrate Nomura has a very strong sales network for retail and corporate clients in Japan,” said Mutsuo Suzuki, an analyst at Moody’s Investors Service in Tokyo. “Nomura has attractive resources for issuers.”

Highest Fee

Nomura received a 1.5 percent fee from Softbank, about three times higher than the 0.451 percent weighted average disclosed fee so far this year in Japan, data compiled by Bloomberg show. The ratio is the highest for a corporate bond sale managed by Nomura since at least 1998, when the data became available, according to company spokesman Kenji Yamashita.

“The fee was high as Softbank hasn’t completed the acquisition and is under review by credit rating agencies,” said Azuma, who is also a managing director at Nomura.

Elsewhere in Japan’s credit markets, Orix Corp. plans to price 5-year and 10-year bonds for individual investors on April 12, according to a filing yesterday with the Ministry of Finance. The Tokyo-based leasing company last month issued 25 billion yen of 0.513 percent notes maturing in 2018, according to data compiled by Bloomberg.

The extra yield that investors demand to hold Japan’s corporate bonds rather than sovereign debt was at 38 basis points yesterday after falling to 37 on April 5, matching the lowest since August 2011, according to Bank of America Merrill Lynch index data. The so-called spread for company notes worldwide fell to 148 basis points, or 1.48 percentage points.

Sovereign Yields

Yields on Japan’s benchmark 10-year government bonds fell half a basis point to 0.52 percent today, after the rates touched a record low of 0.315 percent on April 5. The securities yielded 122 basis points less than similar-maturity U.S. Treasuries, versus 109 a year earlier, data compiled by Bloomberg show.

The Markit iTraxx Japan index of credit-default swaps for 50 companies fell to 92 basis points yesterday, the least since November 2010, according to data provider CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market. A decrease in the contracts signals improving perceptions of creditworthiness.

The yen traded at 99.22 per dollar at 1:48 p.m. in Tokyo today, after earlier falling to 99.66, the weakest since May 2009. It has tumbled 22 percent in the past six months, the worst performance among the 10 developed-market currencies tracked by the Bloomberg Correlation Weighted Indexes.

Nomura Shares

Nomura shares fell 0.8 percent at 1:49 p.m. in Tokyo today after soaring 10 percent yesterday, the most since October 2009, as the weakening yen propelled the benchmark Nikkei 225 Stock Average (NKY) to the highest in more than four years. Credit-default swaps protecting Nomura bondholders from nonpayment dropped to 150 basis points on April 5, CMA prices show, and reached 133.7 on March 11, the lowest in two years.

Mitsubishi UFJ Financial Group Inc. (8306)’s venture with Morgan Stanley was second in the bond underwriting rankings last quarter, improving from third in the previous three months, data compiled by Bloomberg show. Mizuho dropped to third from first.

Nomura was previously No. 1 underwriter in the first three months of 2012, before regulators said it failed to prevent staff from providing tips to traders on share sales it managed.

Japan Housing Finance Agency resumed working with Nomura on bond sales in October after dropping the firm as an underwriter of residential mortgage-backed securities in July, data compiled by Bloomberg show. It appointed Nomura to co-manage bond sales for the six months ending Sept. 30, according to the government agency’s website.

Requirements Met

Nomura “met our requirements” to be a candidate for lead underwriter this fiscal year, Shin Tomonari, assistant manager at Japan Housing Finance, said by phone on April 4.

Development Bank of Japan Inc. hired Nomura for a sale of notes in November after the state-owned lender replaced it in July to avoid “any disruption” to an issuance. The southern prefecture of Fukuoka named Nomura to manage bond sales for this fiscal year, according to its website.

“We will keep making efforts to restore our credibility by offering better business proposals,” Azuma said.

To contact the reporter on this story: Takahiko Hyuga in Tokyo at thyuga@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net


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