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(Bloomberg) -- Billionaire Hiroshi Mikitani said that his Rakuten Group Inc. is keen to sell more bonds to Japanese investors to help diversify funding that has been focused on overseas debt markets.
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“Bond investors are very, very confident or building their confidence in our business,” Mikitani, 59, said in an interview with Bloomberg Television, pointing out that the yields sought by investors when buying the e-commerce conglomerate’s debt had declined “significantly.”
Market pricing indicates that views on Rakuten are improving after years of losses and a stretched balance sheet. Successfully tapping the domestic bond market would add to this momentum, though many challenges remain.
Rakuten’s credit rating sits below the “A” level required by many investors in Japan, it is due to redeem ¥400 billion ($2.6 billion) in bonds in the first half of this year, and despite improvement, Rakuten still faces large losses in its mobile business.
Mikitani said nothing has been decided yet on the size and timing of any debt issuance in Japan. The company’s last domestic sale was in February 2023, to retail investors.
Still, the spread between the yield on Rakuten’s debt and Japanese government bonds has narrowed significantly, showing greater investor confidence. For Rakuten yen bonds due December 2026, the spread contracted to about 180 basis points as of Jan. 16, down from around 490 basis points a year earlier, according to the data compiled by Bloomberg.
Meanwhile, Rakuten’s earnings results for the July-September quarter, which were announced in November, also showed sales revenue from its mobile business increased by 20% from a year earlier.
“I think we will be able to bring down our interest burden” as our performance improves, Mikitani said. “We want to become one of the top tier profitable companies in Japan, and in the future, the world.”
Rakuten’s credit ratings vary across agencies, with S&P Global Ratings setting it at BB, Rating and Investment Information Inc. giving it BBB+, and Japan Credit Rating Agency Ltd. judging it to be A-. Of the 633 companies based in Japan that JCR rates, about 68% had a credit rating of A or higher as of Dec. 31.
While Rakuten’s situation is improving, “it is by no means easy for it to issue yen bonds in Japan,” said Taketoshi Tsuchiya, Chief Executive Officer of Tsuchiya Asset Management Co., citing the company’s sustained losses and lack of improvement in its credit rating. There would need to be an investment rationale for looking past the low credit ratings, such as Rakuten turning to a profit in the mobile business, Tsuchiya said.