Rakuten engages banks for $1b yen bond deal

Rakuten Group Inc. has engaged banks for a yen bond issuance totaling about 150 billion yen (US$1 billion), according to Daiwa Securities Co., one of the underwriters.

The Japanese ecommerce firm aims to attract both retail and institutional investors.

Of the total offering, around 130 billion yen (US$888.1 million) will target retail buyers. The institutional portion will be issued as sustainability debt.

The bonds are expected to price on July 23.

This move follows Rakuten’s 19th consecutive quarterly loss reported in May. The company is seeking additional funding after previously tapping the dollar market.

🔗 Source: Bloomberg

🧠 Food for thought

1️⃣ Strategic pivot to domestic funding amid financial challenges

Rakuten’s yen bond offering represents a notable shift in its funding strategy following heavy reliance on the U.S. dollar market.

The company issued $3.8 billion in dollar bonds between January and April 2024 alone, highlighting its previous dependence on foreign currency financing 1.

This pivot to yen-denominated bonds may be aimed at reducing foreign exchange risk, especially significant for a company reporting 19 consecutive quarterly losses as mentioned in the news article.

The decision to target both retail and institutional investors with different bond structures demonstrates a sophisticated approach to capital raising, with the retail portion accounting for approximately 87% of the total offering.

By leveraging its strong consumer brand recognition in Japan, Rakuten can potentially secure better terms from retail investors than it might from institutional investors who would place greater emphasis on its speculative-grade rating.

2️⃣ Sustainability-linked debt reflects Japan’s evolving ESG finance landscape

Rakuten’s decision to issue institutional notes as sustainability debt aligns with Japan’s expanding ESG bond market, which has seen growth driven by government initiatives and investor demand.

Japan’s Financial Services Agency and Ministry of Economy have established guidelines for green bond issuance, creating a more structured environment for sustainable finance 2.