Tokyo Electric Power may sell bonds in dollars For the first time in at least 13 years

For the first time in at least 13 years, Tokyo Electric Power Co. may sell bonds in dollars and the falling demand cuts size of the bid denominated in yen.

Demand for tickets to the biggest company in Asia for energy has been reduced to the central bank's policy of near zero interest rates pushed the average yield of AA utility debt rated below five years of notes relevant government for the first time in at least five years. Bond sales by Tokyo Electric, or Tepco, have fallen to an average of about 30 billion yen (359 million dollars) each year, from 50 billion yen in 2007 and 2008.

"We want to use the foreign sales of bonds as a tool for fundraising," said Chief Financial Officer Masaru Takei in an interview on December 7 in Tokyo. "We like to think markets such as sales of big bonuses are possible."

The sales of yen-denominated debt by international companies taking advantage of the world's lowest cost loans rose 34 percent this year to 1.74 trillion yen. That sent the rebate to transfer dollars to yen loans through cross-currency interest rate swaps to 57 basis points, the biggest advantage in developed markets, and stimulated a fourfold increase in sales of dollar bonds by Japanese companies to $ 17.6 billion, according to the data.

TEPCO last sale of dollar bonds was in June 1997 when it raised $ 500 million over 10 years 7125 Eurobond percent to yield 26 basis points more than U.S. Treasuries similar maturity. A sale would be the first new U.S. currency by a Japanese non-financial company since 2007.

Narrower spreads

The difference in bond yields versus Tepco Japanese government bonds fell last year, giving investors less incentive to buy new titles. ten-year notes Tepco sold this year were priced from 7 to 9 basis points more than government notes, compared to as much as 13 basis points in 2009.

The average yield of utility debt five years of AA fell 9 basis points above the reference debt on December 22 from 17 earlier this year, after declining to 0.1 basis points below the government's performance on 15 November.

Companies raised less money this year, even as the number of sales increased to 457. Bond sales fell 16 percent to 9.6 trillion yen last year's record ¥ 11,400,000,000,000 which led to the fall of 1664 confidence in the Topix index companies to cut capital spending in the last three months of 2010.

Lower sales

The gross domestic product will shrink 1.9 percent this quarter as spending Prime Minister Naoto Kan stimulus fades, the government-affiliated Economic Planning Association, said earlier this month, citing the forecasts of economists. the second largest economy in the world is struggling to end deflation, a prolonged fall in prices discourages investment media revenues and profit margins.

TEPCO, rated Aa2 by Moody's Investors Service and AA by Standard & Poor's, sold 30 billion yen in bonds to 10 years in September with a return of 7 basis points more than government bonds. The company, which supplies energy to 28.6 million customers, up ¥ 235 000 000 000 in eight domestic sales this year, an average of 29 billion yen issue, the smallest since at least 1999 . The average size has decreased every year since 2007 when it rose ¥ 650 000 000 000 in 12 offerings, or 54 billion yen issue.

"The spread of the bonds of utility is at a historic low," said Yasunobu Katsuki, Mizuho Securities Co. 's primary credit analyst. "There is so much liquidity in terms of public debt as it used to be."

Willing to pay

Tepco sold 300 million Swiss francs (313 million) of 2.125 percent notes due 2017 in March, its first foreign currency bond since the collapse of Lehman Brothers Holdings Inc. in September 2008. Were to yield about 14 basis points more than the rate of exchange in Switzerland, according to TEPCO. The stock has returned 0.8 percent, while the company's 1.73 percent notes of 2017 yen gained 1.9 percent.

TEPCO, which has 732 billion yen in debt due next year and 675 billion yen in 2012, is willing to pay higher rates of foreign debt to improve its image in global bond markets, "said Takei. "We would like to sell foreign currency bonds once a year," he said.

Third, the highest rating

The company may also use bank loans, "said Takei. Sold 407 billion yen of new shares in October to fund a management plan 10 years including the construction of a new nuclear plant.

The cost of protecting company debt from default for five years rose to 42 basis points on December 22, 1934 at the end of last year, after reaching a maximum of 11 months from 58 February 11. The Markit iTraxx Japan index default swaps of 50 investment grade borrowers fell 32 basis points this year to 102. The contracts pay the buyer face value in exchange for the underlying securities or the cash equivalent of a government or a company fails to meet its obligations.

TEPCO will reduce profit forecasts by 40 percent to 80 billion yen in the year to March 2011, while revenue rose 7.4 percent to 5 trillion yen.

Yen weaker

The company can return to dollar markets both expensive and analysts forecast that the yen will weaken to 12 per cent next year. Japan's currency has depreciated by 3.6 percent to 83.16 yen yesterday, and it reached a 15-year high of 80.22 in November, the performance advantage offered by Treasuries widened.

Treasury bonds to ten years rose 55 basis points, or 0.55 percent, this month to 3.35 percent yesterday, while Japanese government bonds due in 1135 were similar percent on December 22, a drop of five points. Japanese financial markets were closed yesterday for a public holiday.

Sales of so-called Samurai bonds, yen-denominated debt of borrowers outside Japan, rose to ¥ 1740000000000 this year of 1.33 trillion yen in 2009, the largest increase since 2007.

The Samurai sales growth helped reduce the exchange of yen every five years at least 63 basis points on December 1, the highest since March 2009. A negative rate means that borrowers debt swap yen into dollars at a discount. Borrowers often use the base currency swaps to exchange floating-rate payments in one currency to another.