EXPORT-IMPORT BANK OF INDIA SUCCESSFULLY RETURNS TO SAMURAI BOND MARKET ON A STAND ALONE BASIS WITH JPY 32 BN DUAL-TRANCHE TRANSACTION
Mumbai August 29, 2019- The Export-Import Bank of India (Exim Bank), on August 29, 2019, successfully returned to the Samurai bond market with a dual-tranche JPY32 bn transaction consisting of three-year and five-year fixed-rate tranches. Samurai bonds are JPY denominated bonds issued by foreign government, agency or company in the Japanese market. The coupon rates were fixed at 0.59% and 0.66% per annum, respectively. The transaction represents Exim Bank’s first Standalone Samurai issuance (without any guarantee) since 2006 while noting that Exim Bank has been maintaining its credit reputation and recognition by issuing JBIC-guaranteed Samurai bonds in 2011 and 2014 and Uridashi-bonds in different currencies including JPY targeting Japanese retail investors.
The Joint Lead Managers for the sale are Daiwa Securities Co. Ltd., Mitsubishi UFJ Morgan Stanley Securities Co., Ltd., Mizuho Securities Co., Ltd., and SMBC Nikko Securities Inc.
On 26 August, the transaction commenced official marketing with price guidance for 3-year tranche at Yen Swap Offer (“YSO”) + 70-75 bps and 5-year at YSO+78-85 bps. Yen Swap rate is the fixed rate in JPY which is exchanged for 6 month floating rate in JPY. As market convention for pricing of Samurai bonds, Yen swap Offer side rate (vs. Bid side) is referred as benchmark. During the first day of official marketing, along with the strong momentum from Japanese as well as investors outside Japan, the book grew rapidly at the tight end of price guidance. The transaction saw strong demand from investors despite volatility in global financial markets due to concerns surrounding the U.S. – China trade war. The second day marketing continued with revision of price guidance to a spread set at the tight end at YSO + 70 bps and YSO + 78 bps for 3-yr and 5-yr tranches respectively. Following the third day marketing, the orderbook closed at JPY 91bn representing 3x oversubscription; with JPY 78.9bn of demand for 3-yr tranche and JPY 12.1bn for 5-yr tranche. The total issue size was then capped at JPY 32bn (USD 300 mn equiv.) allocated to JPY 25bn for 3-yr tranche and JPY 7bn for 5-yr tranche. With respect to the bond issuance, Issuer obtained credit rating of BBB+ from Japan Credit Rating Agency, Ltd. and expects to obtain Baa2 from Moody’s Investors Service Singapore Pte. Ltd. Following the pricing on 29 August 2019, the settlement will follow on 5 September 2019.
During the Pricing at 9:30am Tokyo on 29th August, the benchmark rates of 3-yr and 5-yr Yen swap offer side were at -0.11% and -0.12%, respectively. Japan’s interest rate has remained low as Bank of Japan continues to maintain its easing policy, targeting to keep the yield low and specifically, around zero yield for 10-year Government Bond. In addition, concerns for global economy and changes in expectation for US rate-hike to rate-cut, Japanese interest rate has dropped sharply since the second half of 2018. Currently, the 10 year Japanese Government Bonds yield is standing at -0.280%. Under such environment, demands for Samurai bonds continues to be solid as more Japanese investors are focusing on Samurai bonds to secure the target yield.
In terms of distribution, based on allocation, the 3 year tranche covered Central public funds (32.4%); asset managers (47.2%); regional banks (5.6%); shinkin banks (7.2%); and others (7.6%). The 5 year tranche covered Life insurance companies (62.9%); regional banks (21.4%); shinkin banks (1.4%); and others (14.3%).
Speaking on the occasion, Mr. David Rasquinha, Managing Director of Exim Bank, said that the Bank has successfully returned to the Samurai markets with this issuance. The Bank achieved the tightest spread of marketing range, and the transaction was upsized from originally targeted size. The issuance also captured a good demand from regional accounts as well as the key central investors.
Ms. Harsha Bangari, Chief General Manager & Chief Financial Officer of Exim Bank said that the Bank has been monitoring the Samurai market and has actively engaged with the Investors updating them on the Bank’s business environment including India’s banking sector and its development. This has successfully initiated investors’ interest for Exim Bank’s transaction and preparation of credit lines for the investment. This wide spread investor base will provide a good ground for Exim Bank’s future Samurai transactions.
Exim Bank has been raising foreign currency resources from the international market, which constituted approximately 88% per cent of the Bank’s total lendable resources as on March 31, 2019. Exim Bank aims to promote India’s international trade and investment. The Bank offers Indian companies a comprehensive range of products and services, supported by analysis and research, with a view to enhancing their international competitiveness. The Bank aggressively supports Indian exporting companies, especially medium-sized enterprises, in their globalisation efforts through a variety of lending programmes.
Exim Bank seeks to leverage its strong financials and sovereign rating to raise foreign currency resources from international debt-capital markets through a variety of instruments and a diversified investor base, thereby enabling it to extend financial assistance to Indian exporting companies at competitive rates.