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TOKYO – Rakuten Group is selling a US$500 million (S$686 million) bond to shore up the struggling Japanese internet company’s mobile arm.’s Japanese competitor is expected to set a price for the two-year unsecured bond early next week, according to people familiar with the matter.

The issuance has attracted attention because Japan’s junk bond market is small and nascent, and weaker companies are forced to sell speculative-grade bonds due to the easy access to bank loans. Debt sales continued after Rakuten reported wider losses in the third quarter and faces the risk of a credit rating downgrade.

Bloomberg Intelligence analysts Sharon Cheng and Hui Yen Tai wrote in a report that “Rakuten’s bond issuance plan may signal delays in raising funds from the listing of its banking and securities divisions. There is,” he pointed out. “This also increases rating risk.”

S&P Global Ratings had previously considered downgrading Rakuten due to its mobile business performance, as it expects the company to struggle to attract more users with its ultra-cheap mobile subscription service. is.

“If Rakuten determines that it is unable to make substantial non-debt financing within 2022, S&P may downgrade Rakuten’s ratings, including the proposed U.S. dollar-denominated bond, by one notch,” S&P said in a report Wednesday. rice field.

Rakuten launched its low-cost mobile phone service in 2020, but has struggled to make headway against the country’s three largest mobile operators, which together control more than 90% of an already saturated market. I’m here.

The proposed bond sale represents the latest addition to Japan’s small junk bond market. The country’s speculative-grade issuers have sold $13.5 billion in outstanding dollar-denominated bonds, compared with about $2 trillion globally, according to data compiled by Bloomberg. Rakuten and Softbank Group are among the few Japanese junk issuers in overseas markets.

Morgan Stanley is the lead underwriter, and Goldman Sachs Group Inc., Daiwa Securities, Mizuho Financial Group, Bank of America and Citigroup are also participating in the transaction, said the people, who asked not to be identified. , discussing non-public information. Bloomberg Rakuten seeks $500 million in rare Japanese junk bond offering

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