Rakuten, the Japanese online retailer, is making a significant move in the high-yield bond market, announcing a $1.25 billion offering. The conglomerate, based in Tokyo, aims to strengthen its financial position amidst existing debt obligations.
The specifics of the dollar bond offering, including size and terms, will be determined based on market demand. The company is considering a five-year deal, with pricing expected later in the week.
In tandem with its debt offering, Rakuten is exploring organizational changes to enhance efficiency, including the potential consolidation of its financial units to foster collaboration.
This move follows a previous $1.8 billion bond sale in January, which set a record for a listed Japanese firm issuing in US dollars, with bonds yielding 12.125%. The current offering is expected to yield in the mid-10% range.
Takashi Fujiwara of Resona Asset Management Co. views Rakuten’s bond sale as a proactive step towards debt repayment, particularly considering its substantial upcoming bond maturities.
Despite the positive response to Rakuten’s restructuring plans, the company faces challenges in credit markets, with increasing concerns about debt quality reflected in climbing credit-default swaps.
Rakuten’s reliance on funding from the junk bond market has grown, as its borrowing from major Japanese lenders decreased by over $1 billion last year. The proposed bonds received a BB rating from S&P Global Ratings, indicating heightened risk but also potentially improving liquidity.
Proceeds from the bond sale will be utilized for the redemption or repurchase of existing debt, contributing to Rakuten’s efforts to manage its financial obligations effectively.
