TOKYO, Feb 28 (Reuters) - Nippon Life Insurance Co made its first overseas project finance loan worth $100 million, the company’s officials told Reuters, as the Japanese insurer seeks riskier but higher-return investments amid ultra-low interest rates at home.
Nippon Life bought the project finance loan, which was made to an LNG project in the United States, from Bank of Tokyo-Mitsubishi UFJ, officials of the insurer said.
The loan, whose maturity is over 10 years, has a return of about 1.5 percent after deducting currency hedging costs, the company said.
“The spread is bigger than those of domestic loans,” said Akira Shibata, chief manager at the finance planning and management department.
Japanese insurers often make currency hedges so that swings in foreign exchange rates would not negatively impact the investments abroad when they are repatriated to yen.
The project finance loan is the latest attempt by the Japan’s largest private-sector life insurer to secure investment returns as yields on Japanese government bonds (JGBs) have fallen below levels that meet promises to insurance policy holders.
Yields on 20-year JGBs, a tenor of choice by Japanese life insurers, were well above 1 percent when Bank of Japan launched massive monetary easing in April 2013. They fell to negative territory at one point last year before rising back to 0.62 percent currently.
In January, Nippon Life President Yoshinobu Tsutsui had said the company would start overseas project finance within the coming month, as it accelerates the shift to non-traditional investment fields.
The company is also looking for opportunities to make overseas project finance loans in the primary market, said Ryusuke Sakakibara, deputy general manager at its corporate finance structuring office. (Reporting by Taiga Uranaka; Editing by Amrutha Gayathri)