Overview

Issuing bonds through a private placement is a relatively safe and secure way for a company to raise capital. Compared to issuing bonds through a public offering, this option offers a variety of advantages including confidentiality, a measure of control over capital sources, and generally lower compliance costs. A private placement can usually be completed in less time than a public bond offering, because it is not bound by the same comprehensive due diligence and registration requirements.

One of the largest stock exchanges in the world is the Tokyo Stock Exchange (“TSE”), and it is the largest in Asia. TSE jointly established the Tokyo Pro-Bond Market in May 2011 with the London Stock Exchange for professional investors.

Main Criteria

Debt instruments sold within the framework of a private placement on the Tokyo Pro-Bond Market are only available to professional investors. The Tokyo Pro-Bond Market maintains a list of Qualified Institutional Investors including Japanese licensed securities companies, banks, investment managers, insurance companies, and regulated-investment corporations.

The bonds must be underwritten by at least one underwriter listed on the “Lead Managing Underwriter List” approved by the TSE. As of 28th August 2017, there are 62 dealer companies, including global leaders in the financial services sector like Credit Suisse and JP Morgan.

An issuer can choose to have its debt-issuance program listed on the Tokyo Pro-Bond market or to do a standalone bond issue. ¹

Documents

The following documents must be submitted to the TSE, if the issuer chooses a program listing:

• Program Information;
• Written Assurance regarding Program Listing;
• Specified Securities Information;
• Transaction documents including Conditions of the Bond, Subscription Agreement, Fiscal Agency Agreement or Transfer Restriction Agreement etc.; and
• Other documents including Agent Appointment Letter, Powers of Attorney, Corporate Authorization Documents, etc.²

If the issuer chooses to do a standalone issue, it only needs to file the Specified Securities Information document with the TSE. All documents should be prepared in English or Japanese. For financial documents, the TSE accepts documents prepared in accordance with US or Japanese GAAP (generally accepted accounting principles) or IFFR and Japanese GAAP.³

The TSE fee for a program listing is JPY 1 million and JPY 1 million per issuance for a standalone listing.

The Tokyo Pro-Bond Market attracts companies from Europe, North and South America, the Middle-East and Asia looking to access Japanese capital markets. Since beginning operations in 2011 it has seen the issue of several successful bonds and mainly attracts financial organizations including ICBC, UBS and Swedbank with its perceived low risk, thanks to strict requirements for an issuer's total loss absorbing capacity.

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1. TOKYO PRO Market listing guidebook: http://www.jpx.co.jp/english/equities/products/tpm/listing/01.html

2. TOKYO PRO Market listing guidebook: Overview, Page 11

3. TOKYO PRO Market listing guidebook: Overview, Page 7

(photo credit: profitconfidential.com)