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MUFG Seeks to Sell Remaining Portion of CNX Resources Bonds

Zacks Equity Research

Mitsubishi UFJ Financial Group MUFG is planning to make another attempt at selling the U.S. junk bonds that it bought from CNX Resources Corp., an oil and gas driller, at a discounted price of about 86 cents. The news was reported by Bloomberg.

With a view to enter the debt market, Mitsubishi purchased $500 million of bonds from CNX Resources. These bonds are to mature in 2027. The deal was MUFG’s first as a lead and sole underwriter in the U.S. high-yield bond market.

However, it failed to correctly gauge investors’ opinion on those bonds, and hence landed up selling only a portion at a lower price.

In March 2019, the company made first attempt at selling the bonds, which was unsuccessful. Further, in May, it approached a competitor — Cantor Fitzgerald LP — to help offload $300 million of debt. Mitsubishisold the bond to the brokerage for 90 cents, which in turn sold these to investors at 90.25 cents.

Mitsubishihas undertaken several initiatives in order to expand its sources of revenues. In March, the company entered into an agreement with DVB Bank SE to purchase the latter’s Aviation Finance division. The move formed part of its medium-term management plan unveiled in fiscal 2018, under which, it placed aircraft financing as a key focus.

In early February, Mitsubishi entered into a joint venture with Akamai Technologies to offer a new blockchain-based payment network — the Global Open Network, Inc.

Through this network, the companies seek to provide an extensive set of services, including support for existing payment-processing functions, micropayments, pay-per-use and other developing IoT-enabled payment transactions.

Mitsubishi’s focus on building its global presence through these strategic efforts seems impressive. Notably, its strong capital position supports such expansion strategies. However, net interest income remains under pressure due to low domestic interest rates.

The stock has lost 2.2% over the past six months against industry’s growth of 6.4%.

Zacks Rank & Stocks to Consider

The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the finance space are HSBC Holdings plc HSBC, Credit Suisse Group CS and Banco Santander Brasil SA BSBR. All these stocks carry a Zacks Rank #2 (Buy).

The Zacks Consensus Estimate for HSBC has been raised 2% for the current year in the past 60 days. The company’s share price has gained 3.6% in the past six months.

Credit Suisse has witnessed slight upward revision in earnings estimates for 2019 in the past 30 days. Its share price has risen 10% in the past six months.

Banco Santander’s shares have gained 5.5% in three months’ time. Its earnings estimates for 2019 have moved up 1% in the past 60 days.

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