Goldman reportedly delays samurai bond due to possible downgrade

Bloomberg

Goldman Sachs Group Inc. delayed its first sale of samurai bonds in four years after Moody’s Investors Service placed the bank under review for downgrade, according to a source.

Goldman Sachs pushed back the offering, which may have been as early as Friday, to at least Tuesday, the source said, asking not to be identified because the information is private. The brokerage told investors it plans to raise the size of the sale to at least ¥60 billion from ¥50 billion, and will widen the proposed yield premium, the source said.

The five-year sale will make it the busiest start to the year on record for the market for yen-denominated notes issued by overseas borrowers, according to data compiled by Bloomberg. A taxation rule change next month may make it more difficult for U.S. borrowers to sell samurai bonds. Moody’s said Goldman Sachs’ rating may be cut by two grades, which will lower it to A3, the seventh-highest level.

“Japanese investors have strong faith in Goldman Sachs, so they will buy the bonds,” Hiroaki Fujioka, a senior credit analyst at Daiwa Securities Capital Markets Co., said in a telephone interview from Tokyo.

“But they may be downgraded to the bottom of the ‘A’ range, which means after that investors need to consider the risk of a reduction to triple B. That’s why they increased the spread.”

Hiroko Matsumoto, a spokesman for Goldman Sachs in Tokyo, declined comment on the samurai bond sale.

The offering is being managed by Goldman Sachs’ Japanese unit, according to a Feb. 15 filing with the Finance Ministry.

The firm is marketing the notes to yield between 195 basis points and 210 basis points more than the yen swap rate, having previously targeted a range of 170 basis points to 195 basis points, the source said.

The samurai sale also includes floating-rate notes, of the same maturity, yielding between 210 basis points and 225 basis points more than the three-month London interbank offered rate for yen, according to the source.

“Capital markets firms are confronting evolving challenges, such as more fragile funding conditions, wider credit spreads, increased regulatory burdens and more difficult operating conditions,” Moody’s said in a statement. Goldman Sachs is among 17 banks and securities firms that Moody’s placed under review for downgrade.

Goldman Sachs last sold samurai bonds in January 2008, raising ¥148.5 billion, including ¥18.3 billion of five-year, 2.11 percent bonds priced to yield 110 basis points more than the yen swap rate, according to data compiled by Bloomberg.