Business Context and Reporting Period
This Form 6-K filing by Mizuho Financial Group, Inc. (Mizuho) is dated July 15, 2016. The report announces the issuance of two series of unsecured perpetual subordinated bonds with write-down clauses, designed to qualify as Additional Tier 1 capital under applicable capital adequacy requirements.
Key Financial Metrics and Instrument Details
The filing details the issuance of two bond series with the following aggregate and specific metrics:
- Total Issue Amount: JPY 460 billion (JPY 230 billion per series).
- Denomination: JPY 100 million per bond.
- Payment Date: July 22, 2016.
- Use of Proceeds: To be provided to Mizuho Bank, Ltd. as a subordinated loan.
- Interest Rates (Series 2): 1.38% per annum until December 15, 2021; thereafter 6-month euro-yen LIBOR + 1.55%.
- Interest Rates (Series 3): 1.55% per annum until December 15, 2026; thereafter 6-month euro-yen LIBOR + 1.60%.
- Redemption: Perpetual, with optional redemption by the Company on interest payment dates on or after December 15, 2021 (Series 2) or December 15, 2026 (Series 3), subject to regulatory approval and absence of loss absorption events.
Material Changes and Capital Structure
The filing does not report operational financial changes such as revenue or profit for a specific period. The material change is the expansion of the Company's Additional Tier 1 capital base through the issuance of these specific instruments. The bonds rank junior to general creditors and Tier 2 liabilities but senior to shares and preferred securities of overseas special purpose subsidiaries.
Guidance, Risks, and Unusual Items
The bonds contain significant risk clauses regarding interest payments and principal write-downs:
- Interest Cancellation: The Company may cancel interest payments at its discretion if it does not pay dividends to shareholders. Unpaid interest does not accrue.
- Loss Absorption Event: If the consolidated Common Equity Tier 1 capital ratio falls below 5.125%, the principal and interest may be written down or converted to ordinary shares to restore the ratio above 5.125%.
- Non-Viability Event: Principal and interest are written down to zero if the Deposit Insurance Act measures are applied to the Company.
- Insolvency: Principal and interest are written down to zero upon adjudication of bankruptcy or insolvency proceedings.
- Reinstatement: Written-down principal may be reinstated if the Company's capital ratio remains sufficiently high, subject to confirmation by the Financial Services Agency of Japan.
Investor Verification Checklist
- Verify the current consolidated Common Equity Tier 1 capital ratio to assess proximity to the 5.125% write-down trigger.
- Confirm the Company's dividend policy, as interest payments on these bonds are contingent on the payment of shareholder dividends.
- Review the specific terms of the subordinated loan to Mizuho Bank, Ltd. to understand the ultimate use of proceeds.
- Monitor regulatory communications from the Financial Services Agency of Japan regarding capital adequacy and potential write-down events.