Japanese gaming company suffers $30mn Credit Suisse AT1 bond hit

A Japanese video games maker co-founded by a billionaire sitting on SoftBank’s board has lost $30mn on Credit Suisse bonds wiped out in its rescue by UBS.

Koei Tecmo Holdings, a $6bn gaming company, revealed at an earnings briefing on Monday that it had written off ¥4.1bn ($30mn) after the Credit Suisse additional tier 1 bonds it acquired became worthless.

The decision to invest in Credit Suisse bonds was made by Koei Tecmo chair Keiko Erikawa, who has been a friend of SoftBank founder Masayoshi Son for four decades and has sat on the board of the Japanese technology conglomerate since 2021.

The Japanese gaming company, known for hits such as Nobunaga’s Ambition and Dynasty Warriors, has never made a loss in its 45 years and has an annual dividend payout ratio of 50 per cent. For the fiscal year that ended in March, Koei Tecmo reported an annual profit of ¥31bn. 

But Erikawa, who co-founded the group with her husband, is also famous for managing roughly ¥100bn in its surplus cash and other assets. In a Financial Times interview in 2021, the 74-year-old games designer said she had been investing in stocks since she was 18.

A company spokesman said Erikawa was “deeply disappointed” by the AT1 losses but stressed that it still managed to eke out a profit on the non-operating level. Shares rose 2.7 per cent on Tuesday after it released a stronger-than-expected revenue guidance for the new fiscal year.

The exposure of Japanese financial institutions to the $17bn wipeout of Credit Suisse bonds has been limited, with the government saying last week that about ¥140bn of the Swiss lender’s AT1 bonds were sold in Japan. The most exposed has been Mitsubishi UFJ Morgan Stanley Securities, which sold about ¥95bn of the bonds to domestic retail and corporate clients.

Last week Sumitomo Mitsui Financial Group sold ¥140bn in AT1 bonds, marking the first issuance of the debt by a big bank since the Credit Suisse turmoil.

The bonds are a type of risky bank debt that can be converted into equity or written down to zero if a lender’s capital falls below a certain level. They were introduced by regulators after the global financial crisis to ensure that bondholders would absorb some of the losses in the event of bank failures to help shield depositors and avoid taxpayer-funded bailouts.