International Financing Review September 8 2018 71LOANS ASIA-PACIFIC
facility, tapping the international syndicated
loan markets for the first time.
The deadline for proposals from lenders is
October.
Power Grid is keen to gauge interest from
the Samurai market, especially for a 12-year
borrowing, given that other Indian state-
owned companies have raised similar
long-tenor facilities over the past few months.
State-owned INDIAN RAILWAY FINANCE CORP is
in the market with a US$250m-equivalent
10-year Samurai loan, which was launched
into general syndication in July.
Mizuho Bank, MUFG and SMBC are the
mandated lead arrangers and bookrunners
of the IRFC deal, which was pre-funded on
March 28. The bullet loan pays top-level
all-in pricing of 100bp based on an interest
margin of 80bp over yen Libor and a 9.5-year
remaining life.
The pricing on IRFC’s facility is tighter
than that on a ¥39.42bn 10-year Samurailoan for state-owned NTPC, which closed
in early April. Mizuho, MUFG and SMBC
were the MLABs of the NTPC loan, which
paid top-level all-in pricing of 105bp
based on a margin of 95bp over Tibor
and a weighted average remaining life
of 10 years.
Power Grid, a regular borrower in the
Indian bond market, is rated BBB–/BBB–
(S&P/Fitch), while IRFC and NTPC are rated
Baa2/BBB–/BBB–.
Power Grid last sold Rs30.6bn (US$480m)
of 10-year bonds at 7.2% in August 2017.JSW STEEL LOAN PAYS 230bp ALL-INMumbai-based JSW STEEL is paying top-level
all-in pricing of 225bp–230bp on its
US$140m loan that funds the acquisition of
US-based Acero Junction Holdings.
Axis Bank is the sole bookrunner of the
borrowing, which comprises a US$125mfive-year term loan and a US$15m revolving
credit facility.
Axis is only syndicating the term loan,
which pays an interest margin of 210bp over
Libor and has a four-year average life.
The Indian bank, which has already pre-
funded the financing, is inviting other
lenders at three ticket levels: mandated lead
arrangers with US$30m or above, lead
arrangers with US$15m–$30m and
arrangers with less than US$15m.
Drawdown of the term loan has already
taken place.
Proceeds will refinance debt at US-based
Acero Junction, in which JSW Steel has
already acquired an 83% stake since
announcing the deal in March. The Indian
steelmaker is in the process of buying the
remaining 17%. The deal gives Acero
Junction an enterprise value of US$182.41m,
with equity value of US$80.85m and
liabilities of US$101.56m.Japan Inc ramps up ESG loans
n GREEN LOANS Green and socially responsible financings catching on in Japan
Japan is starting to see an upturn in demand
for socially responsible lending, as Asia’s
biggest loan market catches up with a rising
global awareness of environmental, social and
governance (ESG) issues.
Socially responsible lending includes loans
linked to ESG or sustainable development goal
(SDG) assessments, as well as Green loans,
which restrict the use of proceeds.
SUMITOMO CHEMICAL, which produces a range
of environmentally-friendly products, is currently
in the market with Japan’s first ESG-linked loan,
and two Japanese real estate investment trusts
have recently completed Green loans.
“We’re getting an increasing number of
queries about ESG investment as Japan catches
up with recent global trends,” said Takayuki
Fukuyoshi, vice-president of the sustainability
planning and support department at
Development Bank of Japan.
DBJ began issuing environmental ratings
for Japanese borrowers as long ago as 2004
and has certified ¥1.303trn (US$11.7bn) of loans
in the past 14 years. The loans give borrowers
preferential interest margins based on the
environmental ratings.
The recent surge in interest follows the
establishment of Japan’s version of the
stewardship and corporate governance codes
in 2014 and the signing of the Principles for
Responsible Investment by the world’s largest
institutional investor – Japan’s Government
Pension Investment Fund – in 2015, Fukuyoshi
said.“ESG investment is also a global trend for
lenders, so I believe banks’ efforts like this have
a positive impact on investor relations,” said
Akimasa Yamashita, Mizuho’s manager of real
estate finance department.GREEN LOANS
Asia’s first socially responsible loans were signed
in March, shortly after the London-based Loan
Market Association and the Asia Pacific Loan Market
Association established Green loan principles.
Singapore-listed Olam International
completed a US$500m sustainability-linked
revolving credit facility, while Hong Kong’s New
World Development obtained a HK$3.6bn
(US$459m) Green loan.
Japan’s fledgling Green loan market is
centred around the REIT sector, where a handful
of completed deals have raised awareness.
“I don’t think Green loans are widely recognised
yet [in Japan], but I think that will gradually change
as we’ve been receiving many inquiries from REITs
and corporate borrowers,” Yamashita said.
Mizuho Bank completed a ¥2bn Green bilateral
loan for JAPAN EXCELLENT in late August, which is
the first Green loan for a Japanese REIT to comply
with the LMA and the Asia Pacific Loan Market
Association’s Green Loan Principles.
On September 3, Sumitomo Mitsui Trust Bank
launched a ¥10bn Green loan for UNITED URBAN
INVESTMENT, which is expected to attract a wide
range of investors, the bank said.
Green loans help REITs to attract lenders, as the
use of proceeds is tied to acquisitions or refinancingsof buildings with a green label from DBJ.
“About half of the listed J-REITs have
contacted us regarding the product, so I think
we’re likely to see the next one from the sector,”
said Mizuho’s Yamashita.ESG POTENTIAL
Bankers see greater demand among borrowers
for ESG or SDG-linked corporate loans rather
than Green loans, where the use of proceeds is
more restricted.
SMBC, the arranger, will assess Sumitomo
Chemical’s ESG and SDG-linked loan along with
Japan Research Institute, another company in
the Sumitomo group. Pricing or use of proceeds
is not tied to the assessments.
“Many companies prefer to be evaluated on what
they do for ESG as a whole. In terms of governance,
I think we’re required to look at the whole company
and evaluate rather than cutting out only socially
good businesses,” said DBJ’s Fukuyoshi.
Although the future for green lending seems
bright in Japan, additional costs for borrowers
and the economic rationale for lenders could
present short-term hurdles.
“I doubt there are loan investors who are willing
to step up if it doesn’t make economic sense. The
ultra-low interest rate environment in Japan is
a bottleneck and it’s hard to put a premium on
loans,” said Munehiro Goda, senior vice president
of SMBC’s debt finance department.
“Borrowers and lenders will need to come to
an agreement,” he added.
Wakako Sato9 Loans 2250 p67-80.indd 71 07/09/2018 18:55:11