(Bloomberg) —
Warren Buffett’s Berkshire Hathaway Inc. kicked off a multi-tranche yen bond deal on Monday, several months after announcing investments in Japan’s biggest trading companies.
Berkshire Hathaway is offering yen notes for a third straight year, targeting a four-part yen deal that may price Thursday, according to an email from JPMorgan Chase & Co., one of the bookrunners on the deal. The proceeds will be used for general corporate purposes. The conglomerate sold 430 billion yen ($3.89 billion) of the securities in its inaugural deal in 2019, which was one of the largest-ever sales by a foreign issuer in yen.
The U.S. firm said in August that it had acquired stakes of about 5% in Itochu Corp., Marubeni Corp., Mitsubishi Corp., Mitsui & Co. and Sumitomo Corp. Buffett, chairman and chief executive officer of Berkshire Hathaway, didn’t make any major investment in 2020, but the company bought up its own stock and is sitting on $138 billion of cash.
The company said last year that it planned to hold its Japanese trading house investments for the long term and that it could increase its holding in any of the five to as much as 9.9%.
Berkshire Hathaway also plans to refinance $1 billion of notes that matured on March 15 from the proposed yen debt offering, according to the deal terms.
Debt Demand
Demand for corporate bonds in the yen market has been solid this year as the Bank of Japan’s negative interest-rate policy has kept yields on company debt from rising much, despite volatility. Nagoya Railroad Co.’s five-year bond, which priced with a coupon of 0.09% last month, garnered demand almost nine times the issuance size.
Berkshire Hathaway is offering a five-year bond at 17-20 basis points over mid-swaps, which at current market levels is equivalent to a coupon of about 0.2%. The deal also includes 10-year, 15-year and 20-year notes, with expected ratings from Moody’s Investors Service and S&P Global Ratings higher than those given to Japanese sovereign debt.
Debt sales in yen by foreign issuers typically pay Japanese investors more spread than local issuers of comparable credit quality because of perceived additional risks. Yen bond sales from non-Japanese borrowers this year, however, are running at a record low of about 264 billion yen, as central bank stimulus in other regions has made the yen market less attractive.
Berkshire Hathaway has yen bonds maturing as early as 2023 and as late as 2060. While the 2023 note has returned about 0.01% this year, longer-dated notes have slumped as their yields have risen more. The price on the 2060 note dropped to 92.55 yen on Friday from 97.3 yen at the end of last year, according to data compiled by Bloomberg.
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