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Japanese issuers tap Islamic finance market

Aeon Credit Service, a credit card issuer, became the first Japanese company to tap into the growing market for Shariah-compliant debt when it began issuing under an agreement signed with joint lead arrangers, managers and bookrunners Aseambankers Malaysia, Bank of Tokyo-Mitsubishi UFJ and CIMB Investment Bank.

The papers, issued through the firm’s Malaysian subsidiary, have an aggregate nominal value of up to M$400 million (US$114 million) and are guaranteed through a syndication arranged by Mizuho corporate bank.

"We are looking to raise funds at a rate of 4% to 4.5% in three to five years," said Kuroda Naruhito, managing director, at the signing ceremony for the agreement. "The company has ongoing investments that require funding, and looking at the size of our receivables and borrowings, it’s only natural to diversify into the debt capital market."

Many observers have commented of late that the continuing reluctance of Japanese investors to commit their cash to the domestic market might be slowing the country’s economic recovery; it might also be encouraging issuers to broaden their horizons. In addition to Aeon’s pioneering deal, the Japanese government-linked Japan Bank for International Cooperation is preparing a sukuk mandate to be issued in Malaysia. The deal, reportedly due for launch close to the Golden Week holiday in May, will look to raise up to the equivalent of $300 million, according to Tadashi Maeda, director-general of JBIC.

JBIC has assembled a board of Shariah scholars to explore the possibility of Islamic financing, implying that its first deal, if successful, could be followed by further issuance.

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