TOKYO : Japan's leveraged loan market remains solid despite a global market lull, an executive at MUFG Bank said, as the country's top bank continues to expand its leveraged lending business to back a growing number of private equity buyouts.
"We are not seeing a major deterioration of market sentiment (in Japan) like the one in the United States and Europe," said Jin Nishikawa, who heads the M&A finance department in Japan of MUFG Bank, the main banking unit of giant lender Mitsubishi UFJ Financial Group.
While soaring borrowing costs in other major markets have slowed loan-backed acquisitions in the United States and Europe, Japan's central bank has not joined the global cycle of interest rate rises.
The value of private equity deals have rocketed in Japan so far this year: private equity-backed mergers and acquisitions stood at $23 billion through September this year, up 48 per cent from the same period last year, according to Refinitiv.
Major deals included KKR & Co Inc's $5.2 billion buyout for Hitachi Ltd's logistics arm and Bain Capital's $3.1 billion acquisition of Olympus Corp's microscope unit.
"The market has slightly shifted to the advantage of lenders, but the shift has not been relevant enough to prompt private equity funds to consider foregoing investments," said Nishikawa.
The executive said the Japanese leveraged loan market itself is less susceptible to rate swings than Western counterparts as it's largely dominated by top domestic banks, which tend to hold onto the bulk of debts on their books and provide continuous support to target companies.
Nishikawa said carve-outs from conglomerates and buyouts of founder-led companies will continue to push up private equity deals in Japan.
In tandem with the growing presence of private equity, he expects the Japanese leveraged loan market to continue to expand going forward. The total value of the market reached nearly 2 trillion yen ($14.4 billion) last year, according to the bank.
MUFG Bank has expanded its team focused on matching its client firms with private equity firms suited for their needs, he said, adding that the eight-member team could grow further.
($1 = 138.7600 yen)