Goldman Sachs Pairs Debt Underwriting for Japanese Telco with First Dollar/Yen Swap

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The firm lead-manages a US$150 million Yankee bond issuance on behalf of Japan’s Nippon Telephone and Telegraph in 1984. The issuance is coupled with the first-ever yen/US dollar swap deal, representing an innovative approach to blending two corporate finance disciplines to best serve a client's interests.

In June 1984, Japan’s Nippon Telephone and Telegraph (NTT) issued a US$150 million 10-year, 13.35 percent Yankee bond. Goldman Sachs was lead manager of the issuance, which also entailed a yen-dollar swap deal — the first ever between dollar and yen debt. It was the first time Goldman Sachs lead-managed a Japanese Government issue.

At the time, NTT had not issued bonds in the United States since 1977 due to the prevailing high US interest rates. By attaching a yen-dollar swap to the 1984 issuance, NTT — and the Japanese government, which guaranteed the bond — could be shielded from the interest rate and exchange rate risks the offering would otherwise have entailed. Goldman Sachs acted as an agent in the swap, on either sides of which stood the Bank of Tokyo and a foreign central bank.

In the 1980s, Goldman Sachs was a leader, along with Salomon Brothers and Citicorp, in currency swaps. In 1984, along with Morgan Grenfell, the firm co-led the first US dollar/pound sterling debt swap on behalf of Imperial Chemical Industries. Similarly, NTT’s so-called “hedge bond” represented an innovative approach to blending two corporate finance disciplines to best serve a client’s interests. The following year, 1985, would see the establishment of the International Swap Dealers Association (ISDA — now the International Swaps and Derivatives Association) as a trade organization for the growing market for swaps and other financial derivatives.

Goldman Sachs and NTT’s relationship would grow and evolve in the coming years and decades to include a number of significant transactions, including serving as co-lead manager of another 10-year bond issuance in 1988 — this time for US$500 million — co-leading the IPO of NTT’s mobile unit DoCoMo in 1998 and becoming the only firm to co-lead manage three consecutive equity offerings for NTT when it completed a US$12.6 billion offering known as NTT-6 in 2000.


This article was originally published as part of a series commemorating the 150th anniversary of Goldman Sachs' founding in 1869.