MUFG plans to sell first dollar AT1 bonds in first for Japanese banks

MITSUBISHI UFJ Financial Group (MUFG) has mandated banks to sell dollar-denominated Additional Tier-1 (AT1) bonds, in what looks set to be the first such offering in the US currency by any Japanese lender. 

The nation’s banks have long issued AT1 notes in yen because of lower borrowing costs. But they may consider selling such debt in US dollars to help mitigate foreign-currency risk in their capital ratios, given they can get squeezed when the yen depreciates, Bloomberg Intelligence credit analysts including Pri De Silva wrote in September.

For the MUFG deal, banks will arrange a series of investor meetings and calls in Asia, Europe and the US starting on Monday (Oct 16), according to information from a person familiar with the matter. It is expected to be a benchmark-size offering of perpetual bonds that can be called after 5.25 years, said the people, who asked not to be identified because they are not authorised to speak about it. 

If it proceeds, the deal would be the first such offering by any Japanese bank in US dollars, according to data compiled by Bloomberg.    

MUFG sold 570 billion yen (S$5.2 billion) of bonds, including AT1s in May, in one of the biggest offerings in the local market by a domestic financial institution. At the time, it marked the second offering of AT1 bonds in Japan by a major bank since Credit Suisse contingent convertible bonds got written down by the Swiss regulator as part of its rescue by UBS Group.

The market for subordinated bank debt has rebounded since the Credit Suisse fallout, a Bloomberg index showed. AT1 bonds follow rules developed after the global financial crisis to ensure that creditors are on the hook if a bank fails. BLOOMBERG