ANN/THE STRAITS TIMES – Rakuten Group is marketing a USD500 million bond to bolster the Japanese Internet firm’s struggling mobile unit, in a test of demand for a rare junk debt offering from the country and a borrower under financial strains.
Amazon.com’s competitor in Japan is expected to price the two-year senior unsecured notes early next week, according to people with knowledge of the matter.
The bond offering is gaining attention given Japan’s small, fledgling junk debt market, where weaker companies are not compelled to sell speculative-grade notes due to easy access to bank loans. The debt sale also comes after Rakuten reported widening losses for the third quarter and as it faces the risk of a credit rating downgrade.
“Rakuten’s plan to issue bonds could signal a delay in raising funds through the listing of its banking and securities units,” Bloomberg Intelligence analysts Sharon Chen and Hui Yen Tay wrote in a note. “This also increases rating risk.”
S&P Global Ratings had previously placed Rakuten on review for a downgrade, citing the mobile business’ operating performance, as it expects the firm to have trouble winning more users with ultra-cheap mobile contract offerings.
“We may lower our ratings on Rakuten, including the proposed United States (US) dollar bonds, by one notch if we come to believe the company cannot execute a considerable amount of non-debt financing within 2022,” S&P said in a report yesterday.
Rakuten launched its low-cost mobile phone service in 2020, but has struggled to make headway against the country’s three biggest mobile carriers, who together control more than 90 per cent of an already-saturated market.