(Bloomberg) — Mizuho Financial Group Inc. is ready to deploy “several billion dollars” in riskier funding to companies that need more capital to cope with the fallout from the coronavirus outbreak, its chief executive said.
Japan’s third-largest bank is in talks with corporate clients to provide financing via subordinated loans and purchases of preferred shares totaling more than 100 billion yen ($930 million), and is prepared to supply several times more, Chief Executive Officer Tatsufumi Sakai said.
Such transactions are a key growth area for Mizuho, which has been building its mezzanine and equity financing business to make up for shrinking profitability on regular loans at a time of low domestic interest rates. The pandemic is likely to fuel demand for such funding from struggling companies that need to beef up their balance sheets, Sakai said.
“The economic situation is worse than it was during the Lehman Brothers collapse,” he said in an interview, referring to the 2008 global financial crisis. “I have no doubt it will get far worse ahead.”
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For lenders, subordinated credit and preferred shares are riskier than senior loans because they have less chance of recouping the money in case of default. For borrowers, they can count toward capital, helping them maintain or improve their credit ratings.
Even companies that have faced limited damage from the coronavirus-fueled recession are likely to seek this type of finance, according to Sakai, 60. Some may use it to grasp