Japan's MUFG Bank to expand lending business to back private equity

Japan's MUFG Bank to expand lending business to back private equity

An executive at the MUFG Bank said the country's top bank continues to expand its lending business to back a growing number of private equity buyouts despite a global market lull.

In Japan, the M&A finance department at MUFG Bank, the main banking unit of the giant Mitsubishi UFJ Financial Group, is not seeing a major deterioration of market sentiment like in the United States and Europe, said Jin Nishikawa, head of the M&A finance department in Japan.

While soaring borrowing costs in other major markets have slowed loan-backed acquisitions in the United States and Europe, Japan's central bank has not joined the global cycle of interest rate rises.

Private equity-backed mergers and acquisitions in Japan have gone up 48 per cent since September this year, up 48 per cent from the same period last year, according to Refinitiv.

Major deals included KKR Co Inc's $5.2 billion buyout for Hitachi Ltd's logistics arm and Bain Capital's $3.1 billion acquisition of Olympus Corp's microscope unit.

The market has shifted to the advantage of lenders but the shift has not been relevant enough to spur private equity funds to consider foregoing investments, said Nishikawa.

The executive said that the Japanese leveraged loan market is less susceptible to rate swings than Western counterparts, as it is dominated by top domestic banks, which tend to hold onto the bulk of debts on their books and provide continuous support to target companies.

Nishikawa said that carve-outs from conglomerates and buyouts of founder-led companies will continue to push up private equity deals in Japan.

He expects the Japanese leaded loan market to expand going forward, as well as the growing presence of private equity. The total value of the market reached nearly 2 trillion yen $14.4 billion last year, according to the bank.

MUFG Bank has expanded its team to match its client firms with private equity firms suited for their needs, he said, adding that the eight-member team could grow further.