Japan¡¯s Norinchukin Bank kicked off its first dollar bond sale since the agricultural lender said it expects massive losses on its investments in overseas bonds.
The bank started marketing a five-year green bond on Oct. 8 at a spread of around 155 basis points over Treasurys, according to a person familiar with the matter who asked not to be identified.
The spread is wider than the 130 basis-point area guidance the bank gave when it last sold such a bond in March 2023, despite significant tightening in market spreads over the last 18 months; that deal ended up pricing at a spread of 110 basis points.
Proceeds will be primarily used to finance or refinance environmentally-related projects as defined in the bank¡¯s sustainable-bond framework.
The debt sale may price Tuesday, New York time.
A representative for JPMorgan Chase & Co., the lead bookrunner and the issuer¡¯s green structuring agent, did not immediately respond to a request for comment.
Japan¡¯s largest agricultural bank, commonly known as Nochu, posted a ?413 billion loss ($2.8 billion) in the three months ended June 30, after taking a big hit on its investments in U.S. and European government bonds.
The lender also said it expects to report a loss of about ?1.5 trillion in the current fiscal year.
The spreads on Norinchukin¡¯s dollar debt have ballooned since it first highlighted the bond losses in May, but a recent equity capital raise by the bank and a decline in dollar yield premiums globally on the back of strong U.S. economic data have given a tailwind to the offering.
The initial price guidance for the bond at around 155 basis points is about 32 basis points outside the bank¡¯s dollar debt curve, according to data compiled by Bloomberg, using the Bloomberg NIA function.
The new bond is likely to price well wide of similar maturity-notes from Japan¡¯s megabanks, and Norinchukin will probably have to pay a new issue premium due to the overhang from its securities-portfolio restructuring and related losses, Bloomberg Intelligence credit analysts Pri De Silva and Adrian Sim wrote in a note Monday.
They said fair value for a five-year bond from Norinchukin is around 115 basis points.
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