Samurai bonds: what to expect

Author: Ashley Lee | Published: 27 Sep 2012
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Qatar Petroleum’s samurai bond offering represents one of the first to utilise new regulations that allow primary documentation to be filed in English rather than Japanese.

The JPY 85 billion ($1.1 billion) issue also marks the first yen bond offering by a Qatari entity amid increased foreign investor interest in samurai bonds ahead of a high-profile Indonesia sovereign offering scheduled for the end of this year.

White & Case partner Norifusa Hashimoto, who acted for Qatar Petroleum, said that the transaction volume and number of issuers are both increasing. He noted that more issuers are coming from developed countries as opposed to ten to fifteen years ago.

While samurai offerings from Europe and the Asia-Pacific has declined from the same point last year, Toro Ishiguro, partner at Mori Hamada & Matsumoto, said that low interest rates and abundant personal assets of retail investors mean that non-Japanese issuers will continue looking at the Japanese markets for fundraising. Moreover, Japanese investors frequently see international issuers and are well-informed about such companies.

The samurai market is especially appealing for companies looking to diversify funding sources. Hashimoto observed that Korean banks and companies are the main players in the developed countries’ issuers in the samurai market. But he had also recently seen samurai issues from the Middle East – the first issue from a Middle Eastern company was that of the National Bank of Abu Dhabi in July 2011.

Lawyers believed that the new English-language documentation rules, issued in April, have had little impact on the market, however. Because crucial items such as risk factors or financial indices must be translated and summarised in Japanese, sources say costs have not been lowered.

Hashimoto conceded that the new rules were helpful. But agreed that legal costs have not been impacted much by the change.

Sources also said that the lack of Japanese-language documentation could deter some local retail investors. But Ishiguro noted that it depended on the sophistication of the target investors for a particular issuance. “If an issuer is very high-profile, investors less sophisticated may well still be interested,” he said.