80 billion yen that is.
http://www.bloomberg.com/apps/news?pid=20601080&sid=ac.REUfeFG9Q&refer=asia
Sony Borrows 80 Bln Yen for First Bank Loan in 10 Yrs (Update1)

July 3 (Bloomberg) -- Sony Corp., the world's second- largest consumer electronics maker, said it took out an 80 billion yen ($698 million) syndicated loan last week, its first bank borrowing in 10 years, to diversify funding sources.

The three-year floating-rate loan, which came from more than 20 Japanese lenders, pays 4 basis points more than the London interbank offered rate, or Libor, for six-month yen borrowings, said Mizuho Financial Group Inc., the loan arranger. The six-month yen Libor was last quoted at 0.44750 percent.

Sony tapped the country's expanding syndicated loan market as it offered a cheaper source of cash at a time when investors in corporate debt are demanding higher yields before an expected rise in Japanese interest rates this year. The fund-raising, which ended up bigger than initially planned, offered more flexibility than bonds, said Shinichi Tobe, Sony's spokesman.

``Spreads on corporate bonds have expanded significantly in the past month, whereas spreads on loans generally remained more stable,'' said Hidetoshi Ohashi, a credit strategist at Morgan Stanley in Tokyo.

The yield spread on Tokyo Electric Power Co.'s 10-year bonds sold on June 9 rose to 13 basis points over Japanese government debt with a similar maturity, from 10 basis points when the company sold the same kind of bond in May.

Growing Market

Outstanding syndicated loans in Japan rose 30 percent to a record 37.4 trillion yen as of March 31 from a year earlier, according to the Bank of Japan. The market was less than 1 trillion yen in 1998, according to estimates by banks. Large Japanese lenders including Mizuho are arranging more of this type of financing to increase fee income and boost profits.

Sony will use the proceeds for general purposes, spokesman Koji Kurata said. The Tokyo-based company plans to invest 20 percent more, a total of 460 billion yen, in facilities in the year starting April, including 176 billion yen for semiconductor manufacturing and 100 billion yen for a liquid-crystal display venture with South Korea-based Samsung Electronics Co.

The company also has more than 513 billion yen outstanding in corporate bonds as of March 31, including 250 billion yen in convertible bonds sold in 2003.

Cheaper Finance

The interest rate on the loan ``seems a little tight,'' or cheaper than would be expected by comparing the rate with Sony's bonds maturing in five years, said Ohashi.

Sony's five-year bonds are 14 basis points over Japanese swap rates -- fixed-rate contracts traded equally with Libor. From this, he estimates that the yield above swap rates that investors should demand to hold three-year debt should be about 10 basis points instead of the four offered on this syndicated loan. A basis point is one-hundredth of a percentage point.

The low spread on Sony's loan may reflect strong competition among Japanese banks to provide this kind of deal as companies turn away from the bond market in search of cheaper finance, said Ohashi.

Sony's credit rating was cut one level to A2 in December by Moody's Investors Service, which said a recovery in earnings and cash flow would take longer than some analysts had forecast.

The electronic maker's net income for the year starting April 1 may rise 5.2 percent to 130 billion yen from the previous year, the company said in April. Sony is in the second year of a three-year plan that eliminates 10,000 jobs and cuts 200 billion yen in costs.


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