Rakuten’s Rally From Record Lows Clouded by Looming Bond Deadlines

Japanese e-commerce conglomerate Rakuten Group Inc. is extending a three-month rally in credit markets as it unveils fundraising plans including listing a unit.

(Bloomberg) — Japanese e-commerce conglomerate Rakuten Group Inc. is extending a three-month rally in credit markets as it unveils fundraising plans including listing a unit. 

But lingering questions whether it will be able to service looming debt maturities are crimping that rebound and leaving it stuck as Japan’s riskiest major borrower.

Euro and dollar bonds from the company—a household name in Japan—have jumped from record lows of about 40% to 60% of face value in July to 61% to 71%, after announcing a planned listing of unit Rakuten Securities Holdings Inc. Some of those prices are still in distressed territory though on concern that its unprofitable mobile business will pressure finances. Its credit-default swaps, which insure against debt nonpayment, remain the highest in Japan at 553 basis points, CMA data show.

The most pressing task now for Rakuten, founded in 1997 as an internet shopping mall by Harvard Business School graduate Hiroshi Mikitani, is to raise funds for a wall of more than $5 billion of bonds due in the next two years. Like technology firms worldwide Rakuten and fellow Japanese conglomerate SoftBank Group Corp. have suffered as higher interest rates raise the cost to fund investments in a fast-moving industry.

While Rakuten’s earnings are “on a recovery track, it has yet to raise enough capital to meet its large bond maturities,” said Makiko Yoshimura, Tokyo-based lead corporate ratings analyst at S&P Global Ratings.

It’s crunch time for Mikitani, who built up Rakuten over two and a half decades into a competitor of Amazon.com Inc. in the local market, making him a billionaire along the way. His company needs to gather enough funds to repay 415 billion yen ($2.8 billion) of its bonds maturing next year, and 430 billion yen more is due in 2025, according to Bloomberg-compiled data.

Rakuten has been “actively meeting with credit and equity investors since our public offering in May, and we are aware that there is a high level of interest and concern regarding the redemption of bonds in 2024 and 2025,” the company said in reply to questions from Bloomberg.


Mikitani’s company rose above SoftBank Group in terms of debt risk late last year, surpassing for the first time the tech firm run by Masayoshi Son, Japan’s third-richest person.

SoftBank, started in 1981 by University of California, Berkeley alumnus Son as a computer software retailer, has made its way through more numerous spikes in debt-risk measures after it borrowed heavily to expand its operations. But the company, which now runs a tech investment fund, saw its bond risk fall in the run-up to its chip designer unit Arm Holdings Plc raising $4.87 billion in the biggest initial public offering so far this year in the US last month.

The Arm listing and significant improvements in its investment portfolio may result in S&P upgrading its ratings in the next six months to a year, said Yoshimura. While both companies have a BB score from the rating firm, two levels below investment grade, SoftBank has a positive outlook and Rakuten has a negative outlook from S&P.

To bolster its balance sheet, Rakuten may sell more assets, and that could raise as much as 300 billion yen, said Bloomberg Intelligence credit analyst Sharon Chen. A possible stake sale in Rakuten Card Co., its most profitable fintech business, could raise the most funds, she said.

Free operating cash flow at Rakuten’s nonfinancial operations will likely recover but remain in deficit in fiscal 2024, S&P said in a report last month, so it expects the company to continue relying heavily on asset sales and refinancing to redeem the bonds.

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