Edison Sells ‘Shogun’ Bonds

Southern California Edison celebrated a “first” recently, but it had nothing to do with electric power. The Rosemead-based utility became the first U.S. corporation to sell a dollar-denominated bond in Japan, called a “shogun” bond in investment circles.

After Japan opened its capital markets to foreign corporations last year, a number of companies have sold debt denominated in yen, nicknamed “samurai” bonds. Most American corporations take the yen they receive from investors and then swap them for dollars. Edison decided go ahead with the shogun because “we’re not in the currency trading business,” said Howard P. Allen, chairman and chief executive of Southern California Edison.

Allen said preparation for the Japanese issue took an arduous two months--”a lot of new ground had to be plowed”--but the results were well worth it. He said that since interest rates are lower in Japan, Edison was able to save more than one-quarter of a percentage point over what it would have typically paid in the United States. That translates to a savings of $260,000 a year over the eight-year life of the $100-million debenture offering. The issue carries a coupon of 10.25% and was priced to yield 10.11%.

Allen said he was pleased with the company’s first venture into the Japanese capital market. The debt offering, made late last month, hasn’t yet sold out, “but our bankers tell us that’s normal in Japan,” he said. Edison plans to raise $500 million in capital markets next year and may return to the Japanese market if the timing is right. “It opens up a whole new market for us,” Allen said.