Borrower Can Buy Dom Perignon With Negative Yen Rate Debt Sale

By selling commercial paper at negative interest rates, a Japanese leasing company will get paid enough money to buy a bottle of Dom Perignon Rose Vintage 2004 if it wants.

Sumitomo Mitsui Finance & Leasing Co., a unit of the nation’s second-biggest lender by market value, is set to become the first Japanese company to issue debt and get paid for it, according to the financier. The firm stands to receive 5 billion yen ($44.2 million) plus 25,890 yen next week when it sells the commercial paper and will only have to repay 5 billion yen in six months’ time. It will have about $230 left over, enough to buy the bottle of champagne or 100 cans of beer, according to prices on Amazon.co.jp.

The sale would be the first example of Japanese corporate debt sold at interest rates below zero after the Bank of Japan’s adoption of a negative interest-rate policy in January caused yields on sovereign notes as long as 10 years to fall to minus levels. The deal may be a forerunner to issuance of longer-term debt by companies at negative rates, according to analysts at Mizuho Financial Group Inc. and Nomura Holdings Inc.

CP Dealer

The leasing company is selling the securities to a dealer of commercial paper, according to Sumitomo Mitsui Finance. While the BOJ has been buying debt from companies at minus rates since January, no Japanese firm has sold bonds at a coupon below zero, according to Bloomberg-compiled data.

There is no binding legal restriction stopping Japanese companies from issuing bonds at negative rates, according to Toshihiro Uomoto, the chief credit strategist in Tokyo at Nomura. It may be a “natural” progression of the BOJ’s policy given the capacity for some buyers to profit by selling the debt on to the central bank, he said.

So far, even the lowest coupon on a Japanese company bond is above zero. Japan Finance Corp., for example, sold 25 billion yen of six-year debt in February at 0.001 percent.

Sumitomo Mitsui Finance, which provides funding for everything from airplanes to buildings, agreed to the terms of the offering on Wednesday and will repay the funds on Oct. 3, according to a spokesman for the firm, who asked not to be identified. The commercial paper has an interest rate of minus 0.001 percent, the spokesman said.

To contact the reporter on this story: Finbarr Flynn in Tokyo at fflynn3@bloomberg.net. To contact the editors responsible for this story: Ken McCallum at kmccallum4@bloomberg.net, Russell Ward

By: Finbarr Flynn

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