小编摘要：As fears grow about a potential nationalization of Tokyo Electric Power Co., concern is mounting over some of Japan's leading institutions that have a high level of exposure to the troubled utility.
As fears grow about a potential nationalization of Tokyo Electric Power Co., concern is mounting over some of Japan's leading institutions that have a high level of exposure to the troubled utility.
Life insurers, banks, pension funds -- including Japan's Government Pension Investment Fund, the world's largest -- and individuals hold more than five trillion yen （$61.2 billion） in Tepco corporate bonds.
As speculation increased over a Tepco nationalization Tuesday, the banking subsector on the Topix stock index tumbled 3% and the insurance subsector fell 2%, compared with a 0.9% drop of the overall Topix index.
Tepco's corporate bonds were popular among conservative institutional investors and individuals because they were seen as a safe haven and a proxy for Japanese government bonds. But the cost of credit protection on Tepco debt has soared. The annual cost of insuring $10 million of Tepco debt for five years using credit-default swaps now costs about $400,000, up from about $40,000 before the March 11 quake.
But some bond traders themselves aren't pessimistic, reasoning that with such a wide and deep investor base, the government would, in a worst-case scenario, let equity investors take the hit, while bondholders would receive a far more lenient punishment -- if they are hurt at all. Tepco's three-year debt denominated in euros was seen trading at yield spreads of four percentage points over Libor, meaning the prices are extremely discounted from prequake levels.
'From a risk-reward point of view, something of this size and magnitude, trading at Libor plus [three percentage points] is certainly worth it,' said a trader at a foreign brokerage firm. Standard & Poor's still has a single-A-plus rating on Tepco's long-term debt.
Toshihiro Uomoto, chief credit strategist at Nomura Securities, said bondholders could book mark-to-market losses if talks over nationalizing Tepco do indeed transpire and drag on.
Equity investors are the ones who would take the biggest hit if Tepco is effectively nationalized. Dai-Ichi Life Insurance Co., Nippon Life Insurance Co., the Tokyo Metropolitan Government, Sumitomo Mitsui Financial Group Inc. and Mizuho Financial Group Inc. are among its top shareholders.
'It's very unlikely we'll reduce our exposure to Tepco as we don't think the government nationalizing Tepco is a main scenario,' one banker said, adding that the lender holds Tepco equity and debt. 'It's obviously different from the case of Japan Airlines,' the person said.
The worst-case scenario for shareholders and lenders is that Tepco files for bankruptcy protection, as Japan Airlines did last year, though analysts think there is a very low probability of that. JAL shareholders, bondholders and lenders booked hefty losses.
Hiroki Shibata, analyst at Standard & Poors, said, 'We're cautiously watching the recent move [of Tepco] in the markets, but we also try to see more fundamental parts of the company in terms of credibility and importance of the company,' He added that Tepco doesn't really have a competitor, which makes a difference from the JAL case.
Some see this as a possible buying opportunity for Tepco shares.
'Tepco seems to be the epitome of the cultural issue of investing in Japan,' said Lorne Steinberg, president of Canadian asset manager Steinberg Wealth, noting the speed with which the troubled utility's lenders offered a loan package valued at some $25 billion last week. 'At current price levels we are looking at Tepco shares. It's an important company in the framework of Japan Inc., and virtually everybody has a strong stake in its success.'