Mitsubishi UFJ Financial Group (MUFG) has announced its intention to issue $1 billion in Fixed Rate Resetting Perpetual Subordinated Debt Securities. These securities are designed to qualify as Additional Tier 1 (AT1) Capital and External Total Loss-Absorbing Capacity (TLAC) debt under Japanese regulations. The expected delivery date for these securities to purchasers is on or about September 12, 2025.
The net proceeds from this sale are estimated to be approximately $989 million after deducting underwriting compensation and estimated expenses. MUFG plans to use these net proceeds to fund the operations of its Bank through a perpetual subordinated loan. This loan is intended to also qualify as Additional Tier 1 Capital and Internal TLAC debt for the Bank.
Key features of these AT1 instruments include explicit cancellation and permanent write-down provisions tied to regulatory triggers, such as a Common Equity Tier 1 (CET1) ratio falling below 5.125% or a Non-Viability Event. Interest payments can be cancelled at MUFG's discretion without accumulation, and non-payment does not constitute a default. The securities are structurally subordinated to the liabilities of MUFG's subsidiaries, meaning holders face increased loss severity in resolution or insolvency scenarios. These provisions highlight the significant legal and regulatory risks for holders, as value can be permanently erased, and enforcement rights are limited.
MUFG has also been active in capital management, with recent share repurchases of ¥250.0 billion from May to July 2025 and cash dividends totaling ¥449.7 billion paid in June 2025. The company's prospectus details its capital structure, including ¥2,732.1 billion in pari passu subordinated liabilities and ¥2,546.3 billion in other subordinated liabilities, indicating substantial subordinated debt while also returning capital to shareholders.
