Mitsubishi Brings a Japanese Touch to Municipal Letters of Credit

Mitsubishi Bank Ltd. had the distinction of being the first international bank to write a letter of credit on a major American municipal bond offering. It happened in October 1982, for a $500 million sale of Michigan tax and revenue anticipation notes.

Since then, other major Japanese, European, and Australian banks have eagerly entered the business of writing letters of credit for U.S. municipal bonds. International banks are loath to reveal how many municipal securities they have guaranteed, but Securities Data Co. puts the figure for 1984 at $7.66 billion -- up from $847 million in 1982.

Mitsubishi is the seventh largest bank in the world, with assets of $98.17 billion. Its letters of credit carry the coveted Aaa rating from Moody's investors Service. They are unrated by Standard & Poor's Corp., but observers say that may change soon.

Last week, Takehiro Naruse, manager of Mitsubishi's New York branch, and Hiroshi Ohnishi, deputy general manager, talked with Credit Markets' Mary G. Gotschall about the bank's future forays into the municipal market.

Q. Japanese banks have been aggressively outbidding American banks on letters of credit. For example, if an American bank charges 0.75% of the principal for the deal, you might charge 0.25%. Do you have a …

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Publication information: Article title: Mitsubishi Brings a Japanese Touch to Municipal Letters of Credit. Contributors: Not available. Magazine title: American Banker. Volume: 150. Publication date: March 18, 1985. Page number: 24+. © 2009 SourceMedia, Inc. COPYRIGHT 1985 Gale Group.

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