...- Regulatory reforms on bond issuance at electric utilities in Japan will require us to consider additional factors when evaluating debt issues from April 2025. - Over time, refinancing will reduce subordination risk for newly issued bonds associated with the reforms. - The reforms will compel utilities to change how they manage their finances. A system for issuing debt long cherished by Japan's electric utilities is, after a five-year grace period, set to be terminated. This has credit implications. In March 2025, the grace period for issuing bonds with statutory preferential rights will end. Japan's major electric power companies have long been allowed to issue these bonds. They allow issuers to use their total assets as collateral for repayment. They give holders of such bonds repayment seniority over ordinary creditors. The favorable financing system was established for electric power companies to supply electricity in an inexpensive and stable manner. This system will come to an end...
