TOKYO, Aug 2 (IFR) - [Qatar Petroleum] is on its way to price the tightest deal for a Japan Bank for International Cooperation-guaranteed Samurai as robustinterest from Japanese accounts pushes its guidance tighter on its 10-year bond plans.

QP has eyed the market since March when it mandated all the five major Japanese houses - Daiwa, Mitsubishi UFJ Morgan Stanley, Mizuho, Nomura and SMBC Nikko.

But it was only on Wednesday that it released price guidance on the 10-year bond at yen offer-side swaps plus 27bp-37bp, which was quickly revised today to OS+30bp-35bp on the back of good interest.

That is well inside the 40bp over yen swaps that sub-investment grade Turkey (Ba1/BB/BB+) paid in March for JPY90bn of 10-year JBIC-wrapped money, which will make it the tightest priced for 10-year JBIC-guaranteed Samurai paper. A key driver behind the price mechanics is the underlying credit from an issuer with a rating above Triple B.

For this rare offshore borrower, this will be its maiden foray into the yen market and the first JBIC-guaranteed Samurai bond from a Middle East issuer.

QP's only other international deal, tracked by Thomson Reuters' data, was a standalone issue in 2006, when it raised USD650m in 5-year money at 5.579% via Citigroup and Credit Suisse. This bond was redeemed in May last year.

But QP is now seeking long-tenor bonds. On a standalone basis, raising yen funds in the 10-year maturity would be a challenging exercise for a benchmark-sized offering, said a DCM banker.

In QP's case, there was an odd quirk in the equation. Issuers usually seek a guarantee from a higher-rated entity, but the company (Aa2/AA; Moody's/S&P) is rated higher than JBIC (Aa3/AA-). While QP could issue a standalone Samurai, the JBIC wrap would enable it to borrow at a longer tenor, possibly at a better cost in a market where the standard maturity for a non-guaranteed deal is between three and five years.

The reason behind this is "simply the familiarity that Japanese investors have with JBIC versus QP, notwithstanding the rating", said another source.

The move seems to be paying off. Strong interest has been registered so far from Japanese accounts, confirming the usual solid support for these transactions given the familiarity of the guarantor and the deals' predominantly Japan quasi-sovereign risk. While JBIC is expected to wrap somewhere around 95%, the exact number has not been decided yet, said one Tokyo-based banker.

The issuer is targeting to raise around JPY100bn (USD1.28bn), said to be around the maximum amount JBIC can guarantee. The deal is scheduled to price on August 9, once final approval is granted from QP and JBIC.

The deal will pave the way forward for Japanese investments into the ME as it will become the first broadly sold ME-linked yen credit, albeit being wrapped by JBIC risk. So far, there has only been one Samurai deal from a ME entity - National Bank of Abu Dhabi's (Aa3/A+/AA-/A+) JPY10bn 15-year 2.6% standalone issue done in July 2011 via MUMSS and HSBC. But that deal went to only one lifer and was driven by reverse enquiry, according to bankers.

Although the leads had marketed the QP deal widely, it will be sold as a private placement to Japanese qualified institutional investors only as that will not need an official filing.

The choice of a yen deal for Qatar's state-owned oil and gas exploration and development company, which has only issued internationally once before, may be due to trade links between Japan and the Gulf state. Japan has been buying about 70% of Qatar's oil exports and around 13% of its LNG output since March, according to a researcher at the Japanese Institute of Middle Eastern Economies Centre. Sales increased markedly after the Fukushima disaster forced Japan to look abroad for non-nuclear power generated energy.

(Reporting by Atanas Dinov)

((Atanas.Dinov@thomsonreuters.com))

Keywords: QP YEN BOND/