Q&A: JBIC's Shigeki Kimura

Q: How has JBIC's role as an investor evolved since it was first formed?

A: Historically, JBIC has been a trade financing institution but nowadays it is more focused on facilitating Japanese businesses as they expand abroad. For that reason it puts a lot of effort into supporting overseas M&A.

Q: What impact has this change had on JBIC's investment strategy?

A: We used to limit ourselves to debt financing but now JBIC is more focused equity financing for M&A deals. We have started to diversify our financial offerings and it has become an important tool for JBIC to support Japanese companies' overseas activities. For example, last year Marubeni acquired Gavilon - the number three grain trader in the US - in a $2.7 billion deal with JBIC investing around $600 million in the form of preferred stock. In March we supported a joint venture investment by Mitsubishi Heavy Industries into a European windmill business, investing a maximum of EUR132 million ($181 million).

Q: Why is JBIC's recent commitment to CVC Capital Partners Asia Pacific IV so significant?

A: We had previously made round 20 investments in PE funds, committing around $3 billion, but CVC is the first case of JBIC committing to in a top-tier PE fund. The ticket size for CVC commitment was $100 million; this was relatively big for us, although half of it was provided by Sumitomo Mitsui Trust Bank (SMTB). We are now seeking further opportunties.This participation can be a model that will facilitate greater coordination among PE funds, JBIC, Japanese financial institutions and Japanese companies as potential buyers. for portfolio companies.

Q: How does JBIC's mandate as a public fund impact its investments?

A: Because JBIC is a policy-based financial institution, our mandate is clearly set by law. When we invest in any private equity fund, one or more of our missions should be met. Furthermore, our investments should not be used in Japan, we focus only on overseas activities of Japanese companies. The investment with CVC helps us fulfill our aim of enhancing Japanese companies' overseas activities. We understand it is a commercial transaction and investment targets need to be met, so it depends on negotiations, but our agreement encourages CVC to introduce portfolio companies to Japanese companies at an early stage, and further facilitate information flow to Japanese companies.

Q: Do you expect to see more engagement between GPs and Japanese strategic investors?

A: Japanese companies are willing to be engage in more overseas M&A but the information flow between PE funds and Japanese companies is quite limited. Many Japanese companies and financial institutions have been unable engage with funds - for many reasons, but partly because the ticket size is very big. Through the JBIC-SMTB consortium we can get access to that club and play a catalytic role.

Q: What will this role involve?

A: Not only will JBIC, and its partner banks, be able to add value by utilizing our knowledge and networks, but we will also be able to make co-investments alongside PE funds and alongside Japanese companies. JBIC has various financing tools at its disposal, ranging from senior debt financing to direct equity investment and fund investment. In addition, we can guarantee commercial loans provided by private sector banks. We have a broad network among Japanese companies and financial institutions, so we are in a unique position to work with global private equity firms like CVC.

Q: How has JBIC benefited from the recent changes in the Japanese economy and the polies introduced by Prime Minister Shinzo Abe?

A: The recent developments in the Japanese economy are helping us have a lot more exposure and communication with major players in the PE business. In the past, when the Japanese economy was not doing so well, there was a tendency to pass over Japan and go elsewhere because people believed the country was done. Since the Abe administration and Haruhiko Kuroda, the governor of the Bank of Japan, brought in a radical set of policies, the country has once again emerged as a new frontier. All eyes are on Japan and that has given us a significant opportunity to connect with major players, who are now re-evaluating the potential of Japanese investors and companies.

Q: What are JBIC's plans for its future PE exposure?

A: We want expand to our private equity investment program and this will be a priority as we look to engage in more equity activities either through direct investment or through investment in funds - but we have not set a target. Our history as an investor in the private equity industry is a relatively short but we are trying hard to communicate with major funds in Japan and outside. Several PE firms have a strong presence in Tokyo, such as KKR and CVC, and the exchange of views and information is improving. GPs are now bringing their proposals to us on a regular basis and we are making more trips abroad to Hong Kong, New York and London, trying to meet as many groups as possible in order to generate more deals.

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