Samurai bonds hit by Lehman

Failed bank Lehman Brothers is set to become the first US company to default on a samurai bond, raising fears the fast-growing market may now be closed to borrowers.

The yen-denominated paper issued by foreigners was headed for its best sales in more than a decade.

They rose 61% this year to 2.6 trillion yen (£139.46 billion) as investors sought securities paying higher yields than notes from Japanese companies.

But Standard & Poor's warns Lehman may fail to repay almost all its debt and cut its credit ranking to default, which could affect the market.

"Japanese investors will realise the issuer names are risky and won't want to put money into that market,"said Akira Takei, general manager for international bonds at Mizuho Asset Management.

Lehman's two Japanese firms filed for bankruptcy yesterday with about $7 billion (£3.94 billion) in liabilities. It owes its 10 largest unsecured creditors over $157 billion.