What's happened
Rakuten issued a ¥82 billion ($546 million) perpetual subordinated bond, callable after five years at a spread of 350 basis points over Japanese government bonds. The bond's yield is higher than SoftBank and Japan Airlines, reflecting investor caution amid rising Japanese bond yields and concerns over Rakuten's credit profile. The proceeds will likely redeem a lower-yielding bond, marking a shift in Rakuten's funding strategy.
What's behind the headline?
The bond issuance highlights the cautious stance of Japanese investors amid rising yields, which have reached levels not seen since 2009. Rakuten's decision to issue a perpetual subordinated bond at a higher spread indicates investor wariness about its credit stability, especially as the company balances profits from e-commerce and fintech against losses in its mobile division. The higher yield compared to SoftBank and Japan Airlines suggests that investors demand a premium for perceived credit risk. This move may increase Rakuten's interest expenses but also signals a strategic effort to strengthen its financial position and reduce reliance on offshore markets. The broader context shows a market environment where rising government bond yields are pressuring corporate funding costs, and companies like Rakuten are navigating this landscape carefully to maintain access to capital while managing investor confidence.
What the papers say
Bloomberg reports that Rakuten sold a ¥82 billion perpetual subordinated bond callable after five years at a spread of 350 basis points over Japanese government bonds, reflecting cautious investor sentiment amid rising yields. The Japan Times adds that the bond's yield is above those of SoftBank and Japan Airlines, indicating a higher perceived credit risk. Both sources note that the company is using the proceeds to redeem a lower-yielding bond, signaling a strategic shift. The Bloomberg article emphasizes the impact of rising Japanese bond yields, which have reached their highest levels since 2009, driven by concerns over expansionary fiscal policies and increased funding costs for corporates. The Japan Times highlights that Rakuten's credit outlook has improved, but investor caution remains, as reflected in the bond's relatively high yield compared to peers.
How we got here
Rakuten's recent bond issuance follows a period of reliance on offshore markets. The company is now regaining access to Japan's local credit market as its mobile unit shows signs of improvement. Rising Japanese government bond yields, driven by concerns over expansionary fiscal policies, have increased funding costs for issuers like Rakuten. The bond sale is part of Rakuten's strategy to manage its debt and improve its credit profile, which has seen recent positive outlook revisions from rating agencies.
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