Japan Bank for International Cooperation (JBIC) raised its first $2.5 billion dual-tranche note of 2014 on Thursday, fulfilling half of its annual international funding programme.
The SEC-registered note – split into a $1.5 billion five-year and $1 billion 10-year tranche – is unconditionally and irrevocably guaranteed by the Japanese government, resulting in a credit rating that is on par as the sovereign. The government of Japan is rated Aa3 by Moody’s.
A source close to the transaction said the rarity factor plus high credit quality of the fixed income note enabled JBIC to price both the five- and 10-year offerings 3bp tighter than its initial price guidance of mid-swaps plus 23bp and 45bp, respectively, according to a term sheet seen by FinanceAsia.
The notes also priced flat relative to JBIC's outstanding bonds expiring in 2018 and 2023, the source added, and tightened slightly in early trade to 18bp-19bp and 40bp, respectively, according to Bloomberg data.
JBIC’s debt issue comes at a time when benchmark US Treasury yields have declined to about 2.5% from 3% at the beginning of the year. Ten-year USTs yield dare currently hovering at 2.55% on Thursday, according to Bloomberg data.
“Because we cannot foresee what the rates environment will be like at year-end, JBIC decided to tap the 10-year longer-tenor market this time,” the source close to the deal said.
JBIC is expected to return to global debt capital markets later this year with another one or two government-guaranteed bonds in order to fulfil its annual funding programme of $5 billion for the fiscal year ending March 31, a Tokyo-based syndicate banker added.
The last time JBIC tapped the dollar market is November when it also issued a $2.5 billion dual-tranche bond of similar structure, according to Dealogic data.
High quality participation
JBIC’s dual-tranche offering received a total orderbook of $6 billion from around 180 accounts, said a second source familiar with the transaction.
Central banks and wealth management funds subscribed to more than half of the notes, followed by asset managers, who accounted for 20% and 16% of the five- and 10-year offerings, respectively, indicating a very high quality orderbook, added the source.
For the five-year note, Asian investors subscribed to 40% of the paper, followed by EMEA investors on 32% and US investors with 28%. In the case of the 10-year paper, the split was Asia 56%, EMEA 29%, and the US 15%.
JBIC, headquartered in Tokyo, is incorporated under the Japan Bank for International Corporation Act and is wholly owned by the Japanese government, which is involved in the formulation of its annual budget and business plan.
Barclays, Bank of America Merrill Lynch, Goldman Sachs and JPMorgan were the joint bookrunners of the transaction.