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Malaysia in transition

Malaysia drops Nomura from samurai bond issuance

Kuala Lumpur also demands Goldman Sachs cough up $7.5bn for ex-banker's fraud

Malaysian Finance Minister Lim Guan Eng said the choice of joint-lead arranger was based purely on merit.    © Reuters

KUALA LUMPUR -- Nomura Holdings, a leading candidate shortlisted for a 200 billion yen ($1.83 billion) yen-denominated bond issuance in Malaysia, has failed to clinch the deal. 

The Malaysian government appointed on Friday two Japanese financial institutions, Daiwa Capital and Mizuho Bank, along with HSBC Bank as joint-lead arrangers. The three were selected from six proposals shortlisted out of an initial 27 submissions for yen-denominated 10-year debt instruments, also known as samurai bonds, with indicated coupon rates of less than 0.65% annually. 

"Definitely [it was] one of the candidates," said Finance Minister Lim Guan Eng, referring to Nomura.

He denied speculation that the Japanese investment bank was dropped because of its report Jan. 9 that downgraded Malaysia's equity market. If such speculation turns out to be true, it could cast a shadow over Malaysia's move toward a more democratic and pro-free-speech government. 

"We select them based on merit -- which one is the best and [can give an] attractive price," he said.

Nomura cited the deteriorating fiscal deficit and lack of reforms as reasons for the downgrade, which Lim deemed "simply untrue."

In a Jan. 10 report by Bloomberg, Nomura, HSBC and Mizuho were named the arrangers for the bond sale.

A government source said Lim was supposed to make the announcement on that day but decided to postpone it following Nomura's Jan. 9 report. 

The samurai bond issue, to be guaranteed by the Japanese government, was initiated by Prime Minister Mahathir Mohamad, who made the request to his Japanese counterpart Shinzo Abe in June. Mahathir had said that samurai bonds are cost-effective, and they will be used to reduce debt accumulated by the previous government. 

Malaysia last raised such bonds in 1989, said Lim, hinting that it will be followed by "second and third tranches," subject to the success of the first. The minister will lead a roadshow to Japan next month to finalize the issuance. 

On Friday, Lim reiterated Malaysia's demand that Goldman Sachs pay $7.5 billion in compensation, following the U.S. investment bank's apology on Thursday. 

"Apology [is] not enough," said Lim. "Apology with $7.5 billion, that is what matters."

David Solomon, the bank's chief executive, apologized on Thursday for its ex-banker Tim Leissner's role in defrauding Malaysia through a $6.5 billion debt issuance. Leissner has been charged both in Malaysia and the U.S., where he pleaded guilty.

"If not for the change of government, do you think Goldman Sachs would have apologized?" asked Lim.

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