Japan-based JFM's bonds rated 'AA-'

TOKYO: Standard and Poor's Ratings Services today assigned its 'AA-' debt rating to Japan Finance Organization for Municipalities' (JFM; AA-/Negative/A-1+) series 15 JPY35 billion 20-year domestic senior secured bonds. The bonds are due June 27, 2031. The coupon rate is 2.030pc.

The ratings on JFM reflect the organization's key policy role and its very strong link with the central government in Japan's local and regional government (LRG) sector. Standard & Poor's believes there is a "very high" likelihood of extraordinary support from the government of Japan in the event of financial distress.

We assess JFM's stand-alone credit profile (SACP, which excludes potential extraordinary government support) to be 'a+'. Its loan asset quality is very strong, with no nonperforming loans (NPLs) despite 100pc concentration in one sector: all loans are made to Japanese LRGs and their related entities with LRG guarantees. In addition, there have been no credit defaults on JFM loans since the inception of its predecessor entity in 1957. Although Standard & Poor's recognizes the heavy indebtedness of Japan's LRGs as a constraining factor, the status of JFM as a preferred creditor to LRGs helps maintain its 0pc default rate.

Copyright Reuters, 2011