University of Tokyo to sell first-of-its-kind bond in Japan

Tokyo

THE University of Tokyo is preparing a bond offering that would be the first of its kind in Japan, at a time when demand for higher-education debt is picking up overseas amid falling interest rates.

The university plans to sell 20 billion yen (S$259 million) of 40-year securities in early October, according to a statement from Daiwa Securities Group Inc.

The move follows relaxation of debt-sale rules by Japan's education ministry in June - previously, national universities could only sell notes to finance their affiliated hospitals and other limited projects. Under the new rule, universities can finance research and education projects, according to the ministry.

The debt sale by the Tokyo college, generally considered one of the country's top schools, comes as investors rush to buy debt of elite universities in the US for their high credit ratings and long maturities. American universities such as Harvard and Princeton have sold more than US$30 billion of bonds this year, joining the global boom in corporate debt deals.

National educational institutions in Japan such as the University of Tokyo use taxpayer money or long-term official loans to fund their operations. Letting them also sell bonds to the public to pay for research projects will help increase transparency about how the institutions are run, according to the education ministry.

Investors will be interested in how much government backing there will be for the debt of Japanese national universities, since it's a new area in credit markets, said Yasuhiro Suga, general manager of the fixed-income investment department at Meiji Yasuda Asset Management Co. BLOOMBERG