LatinFinance - January/February 2015 - 21

can expect a very stable audience."
Meanwhile, the pro-bond format, which
requires a less rigorous registration process
than the standard Samurai structure, is
also opening up. An initiative of the Tokyo
Stock Exchange, pro-bonds are publicly
traded but only marketable to institutional
investors. As a result, unlike Samurai deals,
they do not require Japanese-language
documentation.
Santander Chile's deal last year was the
first pro-bond from a Latin American issuer,
raising ¥27.3 billion ($268 million) through
a triple-tranche transaction in April.
The point of many credits is to establish
a foothold in yen with the aim of regular
return trips. Another Chilean bank, Banco
de Crédito e Inversiones (BCI), sold a ¥16.5
billion ($140 million) bond in November in
the Euroyen format (where the bonds are
issued outside of Japan). Although small, it
shows Latin American credits increasingly
appreciate the opportunities that the yen
market may offer. "We were very happy
with the results," says BCI's head of financial institutions, Mario Sarrat. "Our main
goal was to debut in that market and to be
active there, so we can come back when-

TAKAOMI TAHARA , NOMURA

"JAPANESE INVESTORS
TEND TO HOLD THEIR
BONDS FOR A VERY
LONG TIME, JUST LIKE
EQUITY INVESTORS, SO
[ISSUERS] CAN EXPECT A
VERY STABLE AUDIENCE"
ever we need, because [yen investors] will
know us."
Conservative profile
Japanese investors turned their backs on
Latin America following Argentina's 2001
default. It wasn't until 2005 that sovereigns
Colombia, Mexico, Panama, and Uruguay
started to reopen the market, with issues
backed by the Japan Bank for International
Cooperation ( JBIC).
Comparing credits with similar ratings,
Japanese investors are more comfortable
with borrowers from regions - such as

Asia and Europe - that have issued more
frequently and in larger sizes than issuers from Latin America, says Nagayoshi
Motokawa, chief representative of JBIC's
New York office. "Japanese investors in the
Samurai bond market are very conservative," he says. Given their limited information and experience of Latin American
economies in general, Japanese investors
may "hesitate when it comes to making
investments in the region," he says.
Added to this, internal company regulations limit many Japanese investors from
buying below the single-A rating threshold.
However, low rates in Japan and the scarcity of Latin American yen issuance may attract more Japanese investors to BBB-rated
companies from the region. Those rated
below investment grade will still struggle to
issue in yen, but Japanese investors are becoming more aware of the region's relative
advantages, says Nomura's Tahara.
"Europe has its own issues, the US has
its own issues, and Asia has its own issues.
[Japanese] investors realize the difference
in how volatility affects Latin American
countries. If you want to diversify your
portfolio, it's a good idea to buy Latin

Syndicated loans

New competitors
Japanese liquidity is not just bringing change to Latin American
borrowers in the bond markets. Combined with an official interest
in deepening ties with the region, the expanding yen supply is also
growing the pool of bank lenders.
"Our government [...] is quite keen to strengthen relations with
South American countries," says Nagayoshi Motokawa, head of
the New York office of the Japan Bank for International Cooperation ( JBIC).
"All the big [Japanese] banks are quite active in expanding their
operations in South American countries."
That is evident in LatinFinance's 2014 Deals of the Year: two
awards were loan transactions in which Japanese banks were
instrumental.
Mitsubishi UFJ Financial Group (MUFG) was sole lead on the $1
billion facility to Sigma Alimentos that won Syndicated Loan of the
Year. Sumitomo Mitsui Banking Corporation was mandated lead
arranger, collateral agent, account bank, facility agent and documentation agent in the $200 million six-year loan to Brazilian agribusiness operator Amaggi, which won Trade Financing of the Year.
The Amaggi loan was backed by Japanese export credit agency
Nippon Export & Investment Insurance (NEXI). It was signed during Japanese Prime Minister Shinzo Abe's visit to Brazil in August,
part of a tour to six countries in Latin American and the Caribbean. Japan's lack of natural resources is one reason it needs links

to Latin America, says Richard Cook, managing director of loan
syndication in the Americas at MUFG. Indeed, NEXI backing to the
Amaggi loan was contingent on minimum volumes of corn and
soybean exports to Japan.
But commodities are not the only factor. "The domestic lending
market in Japan is saturated," says Cook. "The best growth prospects are outside of Japan."
Japanese banks have also improved their wider product offering in recent years, says Cook: "Japanese [banks] are aggressive,
but they are aggressive selectively, and in order to better position
themselves for the available cross-sell wallet."
When eurozone banks retreated during the worst of the continent's financial crisis, Japanese banks, to some extent, stepped
into their place. But European lenders are already showing signs
of a return. In the first 11 months of 2013, just one Eurozone lender
featured in the top 10 institutions on Dealogic's LatAm loans
bookrunner league table. Three Japanese banks made the cut. But
a year later, the statistics had reversed.
"We've seen liquidity from the Asian banks and definitely now,
more and more from the European banks," says Monica Macia,
head of loan syndications for the Americas at HSBC. "When we
speak to other institutions in Europe, they want to diversify their
portfolios [...] not only in the euro zone but [also] in the Americas." LF

January/February 2015 - L ATINFINA NCE.COM 21

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