MUFG Delays AT1 Bond Sale to After Mid-May Post-Credit Suisse

Mitsubishi UFJ Financial Group Inc. is delaying the sale of an additional tier 1 bond until at least mid-May following a selloff in such debt globally, triggered by writedowns at Credit Suisse Group AG.

(Bloomberg) — Mitsubishi UFJ Financial Group Inc. is delaying the sale of an additional tier 1 bond until at least mid-May following a selloff in such debt globally, triggered by writedowns at Credit Suisse Group AG.

Japan’s biggest bank decided to change its plan based on market developments and investor demand, said Mikito Horino, a spokesman for MUFG. The lender previously signaled its intention to sell the notes as early as late April.

The decision highlights the far-reaching impact of losses imposed on Credit Suisse AT1 bondholders by the Swiss regulator, with some investors warning any new issuance will be a tough sell. No major global bank has issued AT1 bonds since then, Bloomberg-compiled data show.

The average yield in a Bloomberg index of banks’ contingent convertible bonds hit 13.8% after UBS Group AG bought its beleaguered rival in a government-brokered deal last month, which also triggered the CoCo bond writedown. Despite declining again, the average borrowing cost is still three percentage points above its level in early February, the data show.

MUFG becomes the second Japanese bank to indicate plans to push ahead with yen-denominated AT1 issuances in recent days. Sumitomo Mitsui Financial Group Inc., the country’s second-largest bank, started sounding out investors last week on pricing levels for its AT1 notes in yen.

Both institutions had mandated for the potential debt offerings before the Swiss banking crisis.

SMFG may price AT1 bonds later this month with coupons as high as 2.2%, according to people familiar with the matter. That is considerably less than an average yield of about 8.5% on AT1 dollar bonds sold by financial institutions in the Asia Pacific region, according to data compiled by Bloomberg.

The moves by Japan’s top two banks suggest they are keen to keep investors on-board, given the relatively cheap capital the debt provides. Some such as Asset Management One have also sought to take advantage of the recent selloff by buying Japanese AT1s.

The issuance size for MUFG’s two-part AT1 bond deal hasn’t been decided upon, according to a statement from underwriter Mitsubishi UFJ Morgan Stanley Securities Co.

(Updates with comment from MUFG in second paragraph)

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