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Banking & Finance

Deal's financing demonstrates Japanese banks' eagerness to lend

Bank of Tokyo-Mitsubishi has decided to make a very large loan to Suntory.

TOKYO -- In the latest sign that Japanese banks are willing to lend to businesses, Bank of Tokyo-Mitsubishi UFJ plans to provide 1.4 trillion yen ($13.4 billion) to Suntory Holdings for the purchase of American spirits maker Beam, one of the largest loans ever to a private company by a single bank.

     According to the Japanese Bankers Association, outstanding lending by banks at the end of December was up from a year earlier for the 28th consecutive month. Lending to overseas companies and domestic utilities has driven the growth, but this appears to be changing. Bank of Japan data shows the rate of growth in lending is accelerating in such sectors as chemicals, transport equipment and telecommunications.

     This trend has been fueled by strong demand for funds from Japanese companies looking to make acquisitions. Last September, SoftBank borrowed 1.98 trillion yen from several financial institutions, including the country's three megabanks and Deutsche Bank, for its takeover of Sprint of the U.S. And Lixil Group borrowed roughly 160 billion yen from such banks as Sumitomo Mitsui Banking for the purchase of a German company.

     Deals such as corporate acquisitions involve lending large sums at a stroke. Suntory is set to receive a bridge loan from Bank of Tokyo-Mitsubishi for more than 80% of the $16 billion it will spend to buy Beam. The term of the loan is expected be about one year at the most.

     It is highly unusual for a single bank to provide a bridge loan of more than 1 trillion yen to a single company because banks prefer to spread their risks. Bank of Tokyo-Mitsubishi intends to restructure its bridge loan to Suntory into a longer term arrangement after the acquisition is completed. This will likely involve a syndicated loan or a capital increase.

     Monetary easing by the BOJ has resulted in domestic banks holding a lot of surplus cash. Blue-chip companies can procure funds easily at low interest rates, and this has encouraged Japanese companies to buy aggressively overseas.

     Bank of Tokyo-Mitsubishi's parent, Mitsubishi UFJ Financial Group, aims to boost lending for acquisitions by having its banking and brokerage units work together. Mitsubishi UFJ Morgan Stanley Securities will serve as financial adviser for Suntory's latest acquisition. The brokerage has expanded its M&A advisory business, having received high marks for its industry analysis and other tasks that make use of information gathered by Morgan Stanley.

(Nikkei)

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