Rakuten focuses on the domestic market: Bond offensive planned

Hiroshi Mikitani, the billionaire founder of the Rakuten Group, is determined to conquer the Japanese market with new bond offerings to diversify the financing base, which has so far been heavily geared towards foreign debt markets. This initiative follows increased investor confidence in the e-commerce conglomerate's business model, as Mikitani emphasizes in an interview. Despite a challenging past with loss-making years and a strained balance sheet, Rakuten now sees an improved market outlook. The recent decline in yields demanded by investors when purchasing Rakuten debt securities reflects the growing confidence. While major challenges remain, successful tapping of the domestic bond market could provide additional momentum. However, Rakuten's creditworthiness is still below the "A" level required by many Japanese investors. Although the company conducted a domestic bond issuance to retail customers in February 2023, no decision has been made yet regarding the timing or volume of future bond sales. However, market data speaks clearly: the spread of Rakuten bonds over Japanese government bonds has significantly decreased. This underscores the increased investor confidence as the spread for Rakuten yen bonds maturing in December 2026 has fallen to about 180 basis points. Additionally, revenues in the mobile segment rose by 20% in the third quarter compared to the previous year. Mikitani is optimistic: “With the improvement of our performance, we will be able to reduce our interest burdens," he said, setting high profitability goals for the company, both nationally and internationally. Rakuten's credit ratings present a mixed picture: while S&P Global Ratings sets the rating at BB, the Rating and Investment Information Inc. assigns a BBB+, and the Japan Credit Rating Agency sees Rakuten at A-. Despite a slight recovery, it remains a challenge to place bonds in Japan, as Taketoshi Tsuchiya of Tsuchiya Asset Management highlights. However, a compelling investment logic, such as profitability in the mobile business, could make the difference.