Photo of Edwin Tey, Global Treasurer.

First JPY denominated bonds refinance logistics park in Greater Tokyo

The challenge

The key challenge faced by many offshore issuers in accessing the JPY bond markets is securing long-dated debt beyond five years. From 2017 to 2020, more than 50% of issuances in the cross-border JPY market comprised a maturity of five years or less.

Borrowers who were able to access longer tenors were typically restricted to the highest quality issuers, such as sovereigns, supra-nationals, and agencies (SSAs), US, and European Financial Institution Groups (FIGs) and US multinational corporations (MNCs). Meanwhile, activity from non-US corporates in tenors >five-years remained extremely limited in the JPY bond markets.

When considering public debt securities issued by foreign names with a tenor >fiver-years, Japanese investors focus heavily on high-quality credit ratings typical of SSAs, FIGs and large US MNCs. Despite holding a robust investment grade issuer credit rating from all three major international rating agencies, GLP faced a challenge in tapping the JPY bond market in the longer tenors as compared to other developed capital and bond markets.

The primary objectives of the JPY15.4bn nine-year fixed rate senior unsecured transaction in the Tokyo Pro-Bond format, guaranteed by the Credit Guarantee and Investment Facility* (CGIF), were to:

• Access long-dated JPY liquidity to extend debt maturity profile.
• Attain the tightest possible pricing level in line with GLP’s internal funding targets.
• Diversify GLP’s core investor base to include new institutional investors from Japan.
• Tap a new source of capital in the JPY bond market.

“Proceeds from the transaction were used to refinance our ALFALINK Nagareyama assets, a large-scale logistics campus located in Greater Tokyo which offers fully integrated, innovative supply chain solutions in a modern open-concept design,” says Edwin Tey, Global Treasurer.

The solution

The eventual solution involved partnering with CGIF, for a 100% principal and interest guarantee of a JPY bond issuance.

Being the first transaction of its kind – both as a first yen-denominated bond issued under the ASEAN+3 Multi-Currency Bond Issuance Framework (AMBIF) as well as the first yen-denominated bond with a CGIF guarantee, the transaction is unparalleled in terms of deal novelty and innovation. Due to the inaugural nature of the transaction, it entailed a lengthy and comprehensive documentation process.

Best practice and innovation

As the debut yen-denominated bond issued under the AMBIF format and the debut yen-denominated bond with a CGIF guarantee, the historical transaction is a pioneer and sets a precedent for all regional issuers to follow.

It achieved GLP’s corporate funding objectives of extending bond tenor beyond five years and lowering coupon costs, as well as the broader regional objectives of CGIF in strengthening linkages in the cross-border bond markets. The concurrent achievement of GLP’s largest ever JPY deal in its first foray into the yen bond market, is further testament to the resounding success of the transaction.

Key benefits

• Diversified investor base.
• Paved the way for further involvement in the JPY bond market.
• Extended bond tenor to nine years.
• First ever nine-year bond in the cross-border JPY bond market.
• Lowest coupon priced in the nine-year and above tenor bucket from a non-American corporate in the cross-border JPY bond market.
• Secured an attractive all-in pricing with significant cost-savings.
• Rated AA by S&P.

*CGIF, rated AA by S&P, is a trust fund of the Asian Development Bank and functions to provide guarantees on local currency denominated bonds issued by corporations within the ASEAN+3 region. CGIF’s main objective is to promote financial stability in the region and aid the development of ASEAN’s bond markets.