TOKYO -- Nippon Telegraph & Telephone will issue more than 500 billion yen ($4.74 billion) in corporate bonds, a record for a single float in the Japanese market, to raise cash for its 4.25 trillion yen tender offer for subsidiary NTT Docomo.
The telecommunications company may still add hundreds of billions of yen to the offering, depending on demand from institutional investors. An overseas float also is being considered, as the parent may be unable to raise all the capital it needs from Japan's relatively small bond market. The overall total raised could top 1 trillion yen.
The domestic offering will be split into four tranches, with maturities ranging from three to 10 years. The coupon is expected to be around 0.4%, based on NTT's credit rating of AA- from S&P Global Ratings -- the agency's highest score for a Japanese company -- along with the market environment and the size of the float.
NTT could look to issue dollar-denominated bonds in the more liquid U.S. market. Though the company likely would need to pay a higher interest rate there, the move would diversify its funding sources.
Strong demand is expected from investors chasing higher yields as loose monetary policy holds down interest rates. The Bank of Japan has expanded its purchases of corporate debt to help businesses access capital.
The issue will provide capital needed in NTT's tender offer for the remainder of wireless carrier Docomo, along with investments in growth areas such as fifth-generation wireless infrastructure. Because the government's stake in NTT cannot go under the one-third set by the law, the company decided to tap the bond market, instead of issuing new shares.
The issue will be underwritten by SMBC Nikko Securities, Mitsubishi UFJ Morgan Stanley Securities, Mizuho Securities, Nomura Securities and Daiwa Securities.