Fears of Rising Credit Costs in Japan Prompt JIA to Seek Rating

Japan Investment Adviser Co., the first unrated company in the nation to sell publicly offered bonds, is preparing for rising costs by seeking a credit grade.

(Bloomberg) — Japan Investment Adviser Co., the first unrated company in the nation to sell publicly offered bonds, is preparing for rising costs by seeking a credit grade.  

“We assume that interest rates will rise in the future, and we want to procure long-term funds as much as possible,” JIA board member Takeshi Sugimoto said in an interview. “A rating will be necessary to improve the conditions of the issuance. We hope to get it in the near future.” 

The aircraft leasing company has already contacted two rating firms, and the firm is seeking information about what points are important in order to obtain a credit assessment, Sugimoto said.

Concern about the Bank of Japan starting to unwind its years of ultra-easy monetary policy is prompting Japanese companies to brace for increased borrowing costs. At the same time, they’re seeking to access the corporate bond market as much as possible with issuance levels this year heading for a record. 

JIA raised ¥3.5 billion ($23 million) in September from a sale of two-year debt with a coupon of 1.6%. The notes have rare covenants, and JIA also appointed a bond management assistant for the first time in Japan.

“We wanted to diversify our financing methods, although borrowing from banks is less costly,” Sugimoto said.

The Tokyo-based firm visited some five brokerages to seek underwriting, but all except Mizuho Securities Co., which acted as the lead manager, rejected its request saying they would not underwrite any unrated companies, Sugimoto said. 

JIA will get bank loans or issue bonds for future fundraising, rather than selling new shares. It has raised cash three times through new equity offerings since its listing in 2014, but the share price is currently far below the offering price. 

“We should go with debt as much as possible, and touching the stock is not a good idea right now,” Sugimoto said. 

JIA filed a shelf registration with Japan’s financial authorities in July, allowing it to issue as much as ¥6 billion in bonds over the next two years. It may issue publicly offered bonds again before it gets a credit assessment, or after obtaining a rating, according to Sugimoto.

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