TOKYO (Reuters) - Nomura Holdings (>> Nomura Holdings Inc.) was excluded as underwriter from two bond issues planned by a government-owned housing agency on Monday, marking at least the fifth issuer to drop Japan's top broker from a deal in the wake of an insider trading scandal.
The Japan Housing Finance Agency said on Monday that it had decided not to employ Nomura as underwriter on its planned issue of a 30-year straight bond and a mortgage-backed security, citing "various reasons".
The announcement brings to at least five the number of issuers that have dropped Nomura as an underwriter in the wake of the scandal, including planned fund-raisings by the state-backed Development Bank of Japan, Resona Holdings (>> Resona Holdings Inc), Kansai Electric Power (>> Kansai Elec. Power) and the government in its planned sale of Japan Tobacco (>> Japan Tobacco) shares.
Moody's Investors Service said in a note on Monday that the move by issuers to exclude Nomura and other brokers implicated in the securities regulator's crackdown on insider trading was a potential negative for their credit ratings.
"At this point the impact is more reputational than a direct hit on profitability," said Maki Hanatate, a senior credit officer at Moody's, which lowered Nomura's rating in March to Baa3, one notch above speculative grade, with a stable outlook.
"But Nomura does more than handle bond deals. If the impact spreads to M&A and other deals, or other parts of the business then that would be negative."
The next big deal on investors' radar screens is the roughly $8 billion initial public offering of Japan Airlines slated for September. Nomura was named a global coordinators earlier this year before it became ensnared in the insider trading probe.
The decision on whether to keep Nomura as an underwriter on that deal will fall to the Enterprise Turnaround Initiative Corporation of Japan (ETIC), the state-backed fund that injected capital into the airline following its bankruptcy in early 2010.
Nomura may have hurt its chances to stay on the deal by agreeing to underwrite a 210 billion yen ($2.6 billion) equity offering by rival carrier All Nippon Airways (>> All Nippon Airways), according to financial sources with knowledge of the ETIC's thinking.
The deal, announced to the surprise of many last week, means ANA will be looking to tap basically the same investor base two months ahead of JAL.
More than the insider trading issue, "it was Nomura being among the ANA underwriters that was more upsetting," one of the sources said.
The sources were not authorized to speak publicly about the matter. Nomura, the ETIC and JAL declined to comment.
Nomura has admitted it was the source of leaks - from its institutional sales department - on planned share offerings in 2010 by energy firm Inpex (>> INPEX Corp), Mizuho Financial Group (>> Mizuho Financial Gr.) and Tokyo Electric Power (>> Tokyo Elec. Power).
On June 29, Nomura published the results of an internal investigation that detailed a major breakdown in safeguards established to protect confidential client information, and announced a series of measures to prevent a recurrence.
The broker also shut down its institutional equity sales operations last week and halved Chief Executive Kenichi Watanabe's pay for six months as part of a package of self-imposed penalties aimed at closing out the probe.
A probe by the Securities Exchange and Surveillance Commission (SESC) has also implicated Japan's second-largest broker, Daiwa Securities Group (>> Daiwa Securities), for leaking information on one public share offering in 2010. Third-ranked broker SMBC Nikko Securities was punished for priming its retail clients with non-public information about a share offering by its parent bank.
The investigation has provided an opening for brokerages that have not been caught up in the probe, Moody's said.
Mitsubishi UFJ Morgan Stanley Securities was named the lead underwriter on the housing agency's 30-year straight bond, and took Nomura's spot on the mortgage-backed security, where it will work alongside Mizuho Securities and Credit Suisse.
The Development Bank of Japan and a unit of Resona Holdings said separately last week that they had dropped Nomura from planned bond issuances, both citing the insider cases and the possibility of regulatory sanctions.
Kansai Electric dropped Nomura, Daiwa and SMBC Nikko from a bond issue for this month, according to a source with knowledge of the matter. Kansai said it had appointed Mizuho Securities and Mitsubishi UFJ Morgan Stanley to handle the deal.
Last month, Nomura was omitted from the government's planned sale of $6 billion worth of shares in Japan Tobacco.
Nomura shares closed Monday down 2.4 percent at 281 yen, underperforming the broader Nikkei average <.N225>, which fell 1.4 percent. ($1 = 79.5300 Japanese yen)
(Additional reporting by Taiga Uranaka, Nathan Layne and Emi Emoto; Editing by Edmund Klamann and Chris Gallagher)
By Naoyuki Katayama
Stocks treated in this article : INPEX Corp
, Japan Tobacco
, Mitsubishi UFJ Fin.
, Resona Holdings Inc
, Mizuho Financial Gr.
, Daiwa Securities
, Nomura Holdings Inc.
, All Nippon Airways
, Tokyo Elec. Power
, Kansai Elec. Power
, Credit Suisse Group AG
, Morgan Stanley