Credit Spreads On Takefuji Crawl In After Scandal

  • 15 Dec 2003
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Credit protection on Takefuji Corp., one of Japan's largest consumer finance companies with assets totaling over JPY1.9 trillion (USD15.8 billion), started to move in early last week after its chairman resigned on the back of a scandal. Yasuo Takei, founder and chairman in Tokyo, stepped down following his arrest in regards to wiretapping the telephone of a freelance journalist investigating the company. Three weeks back, the announcement of his arrest caused spreads on the corporate to blow out.

"This was the largest move of the year," said a trader at Deutsche Bank. Five-year protection jumped from 70 basis points to over 300bps. Traders said the spreads blew out because end users holding Takefuji bonds were concerned about the future of the company following the arrest and looked to buy default-swaps to hedge their positions. "People were concerned about the [future] management of the company," said Nobukazu Saeki, chief manager of the credit trading department at Mitsubishi Securities.

When it appeared that the scandal was under control spreads tightened to around 275bps. Takefuji's board of directors accepted the resignation and posted an apology on its Web site.

Takefuji is rated A3 by Moody's Investors Service and was placed under review for a possible downgrade last month. "It's still under consideration," confirmed Hiroshi Watanabe, spokesman at Moody's Investors Service in Tokyo.

  • 15 Dec 2003

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5 Barclays 209,291.80 811 5.87%

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4 BNP Paribas 25,663.29 144 5.30%
5 Credit Agricole CIB 22,617.86 130 4.67%

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4 Citi 14,014.57 86 7.06%
5 Goldman Sachs 12,113.98 67 6.10%