Big move: People walk past the Sumitomo Mitsui Banking Corp headquarters in Tokyo. The terms for the AT1 bonds are seen as being ‘reasonably good’. — Bloomberg
TOKYO: Sumitomo Mitsui Financial Group (SMFG) has priced US$1.04bil (RM4.6bil) of additional Tier-1 (AT1) debt, becoming the first major Japanese bank to sell them since the value of similar bonds issued by Credit Suisse was wiped out.
SMFG priced the bonds in two tranches: 89 billion yen (US$662.5mil or RM2.9bil) five-year notes, and 51 billion yen (RM1.7bil) 10-year bonds, whose terms market players said were attractive.
“In Japan, where spreads over corporate bonds are thin, the terms for these AT1 bonds were reasonably good, provided that the banking sector is credible,” said Nana Otsuki, a senior fellow at Pictet Japan.
“SFMG had a choice of not selling them, but they went ahead, likely signalling that the Japanese financial system may be more stable than those in other countries.”
Investors had grave doubts about AT1 bonds amid the market turmoil caused by the government-led rescue of Credit Suisse by rival UBS.
The Swiss regulator, Financial Market Supervisory Authority, determined that Credit Suisse’s AT1 bonds would be wiped out, a decision that rocked global credit markets.
Domestic peer Mitsubishi UFJ Financial Group Inc said earlier this month it would put AT1 debt issuance on hold until mid-May at the earliest, pointing to weak investor demand and market conditions.
AT1 bonds, known as “contingent convertibles” or “CoCo” bonds, can be converted into equity or written off if a bank’s capital level falls below a certain threshold. — Reuters
