MUFG Bank seeks financing partners to share buyout risk, CEO says

By Anton Bridge and Miho ‌Uranaka

TOKYO, April 22 (Reuters) - Japan's ​largest ​lender, MUFG Bank, is seeking partners such as life and non-life insurers to share risk as it increases financing beyond traditional loans for large corporate deals ‌including leveraged buyouts, its chief executive said.

The bank is aiming to limit funding ⁠just through its own balance sheet so as not to bear the risk of financing deals, increasingly in the ‌trillions of yen, alone, as a ‌wave of leveraged buyouts sweeps Japanese firms.

"The more diversified the sources of funding the better," MUFG Bank CEO, Masakazu Osawa, said in an interview with Reuters. MUFG Bank is ​the banking arm of Mitsubishi UFJ Financial Group.

Osawa's comments indicate that appetite for major M&A activity remains strong among Japanese firms even as conflict in the Middle East has upended ⁠global trade and energy markets.

"To finance leveraged buyouts, we're in a world where we have to structure the whole deal, including ​equity finance, to jointly take on risk, otherwise we won't be chosen by clients," Osawa said. Leveraged buyouts involve funding an acquisition with a ​large amount of borrowed money backed by the target ‌company's assets and future cash flow as collateral.

Life and non-life insurers, who hold long-term capital, are potential partners, as are government entities and private ⁠credit funds, Osawa said.

Japanese Prime Minister Sanae Takaichi has highlighted 17 sectors critical to economic security, such as semiconductors and shipbuilding, in which to focus public-private investment efforts.

M&A activity involving Japanese companies last year more ⁠than doubled from the previous year to a record 53 trillion yen ($333 billion), LSEG data showed.

While redemption requests ​at global private credit funds have raised concerns about banks' exposure to potential downside, the financial regulator views it as a key pillar of its new strategy to meet rising demand for funding among Japanese corporates.

Japan's market "remains ‌underdeveloped and needs cultivation," Michinori Haba, the Financial Services Agency's deputy director-general in charge of financial markets, told Reuters last week.

MUFG Bank's base case ‌is that the global economy remains relatively strong.

"The key question is how much of a setback we ⁠see from factors including the situation ‌in the Middle East. At ​the moment, nothing too negative has surfaced but things may gradually emerge from here," Osawa said.

($1 = 159.1800 yen)

(Reporting by Anton Bridge and Miho Uranaka; Editing by ‌Jacqueline Wong)

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