RAKUTEN Group started marketing its third US dollar bond of the year, seeking to take advantage of strong investor appetite for junk rated debt that drove US spreads to their lowest since 2007.
The Japanese e-commerce giant is targeting the sale of as much as US$550 million of subordinated notes that can be called after five years, with price talk for the deal given at 8.375 per cent area, according to a source with knowledge of the matter. Rakuten is offering debt with a rating of single B from S&P Global Ratings, three levels below its issuer score.
Rakuten is a rare Japanese issuer in the US high-yield market, upon which it has become increasingly reliant for funding after its mobile network business saddled it with a string of losses and lower credit ratings. The company, which priced US$3.8 billion of US dollar bonds between January and April, said it plans to use the funds from the current offering to redeem yen notes that have call options late next year.
Rakuten has been selling stakes in financial units to boost liquidity. S&P Global Ratings revised its outlook on the company’s credit rating to stable from negative earlier this year, citing reduced losses at its mobile carrier business.
Market expectations for more rate cuts by the Federal Reserve and a soft landing for the US economy have reduced borrowing costs for speculative-grade bond issuers compared with when Rakuten priced its last US dollar note in April. Spreads on US junk notes tightened to their lowest since 2007 in November and are still hovering near historic levels under 265 basis points, a Bloomberg index shows.
Rakuten’s subordinated US dollar note callable in 2031 yielded 8.8 per cent earlier this week, less than half a record 18.1 per cent touched in July of 2023, Bloomberg-compiled data show, signalling greater investor confidence in the firm.
Rakuten has 400 billion yen (S$2.7 billion) of yen-denominated bonds maturing in the first half of next year but the company has no US dollar notes due in 2025, the data show. BLOOMBERG
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