Berkshire Hathaway Inc. sold 164.4 billion yen ($1.2 billion) of bonds, paying some of its highest costs ever to sell debt in the currency as speculation about Bank of Japan policy tightening increases the burden for issuers.
(Bloomberg) — Berkshire Hathaway Inc. sold 164.4 billion yen ($1.2 billion) of bonds, paying some of its highest costs ever to sell debt in the currency as speculation about Bank of Japan policy tightening increases the burden for issuers.
Warren Buffett’s firm, one of the largest overseas issuers of yen debt, paid higher spreads across all five tenors compared with a previous deal in December, while all-in costs for Friday’s transaction reflected an even steeper jump in borrowing.
The firm’s five-year note priced to yield 1.135%, according to an email from Mizuho Securities Co., one of joint book-runners on deal. That’s nearly seven times higher than when the Omaha, Nebraska-based company paid when debuted in the yen bond market in 2019, underscoring that Japan hasn’t been immune to the global rise in borrowing costs.
The deal came just days after the billionaire investor made headlines by saying he’d increased holdings in Japanese trading houses. Berkshire lured yen bond investors with stronger credit ratings from Moody’s Investors Service and S&P Global Ratings than the credit assessors give to the Japanese sovereign.
Relatively, however, Japanese borrowing costs still remain low by global standards, but traders are betting the BOJ will follow global peers and exit negative rates under new Governor Kazuo Ueda.
“There is a strong possibility that the yen will appreciate as the BOJ has nowhere to go but up while disinflation elsewhere means global rates have peaked,” said Amir Anvarzadeh, a strategist at Asymmetric Advisors in Singapore. “Japanese stocks are cheap and Buffett made a ton of money on those trades he bought in 2020.”
The proceeds from the offering will be used for general corporate purposes, including refinancing some debt, according to the issuer in a filing earlier this month. A 56.3 billion yen bond of Berkshire Hathaway matures Friday.
Buffett’s conglomerate has sold about 1.2 trillion yen of debt, including today’s offering, since its debut sale in 2019.
The US company, which Buffett took control of in 1965, surprised Japanese markets in 2020 when it bought shares in local trading companies after pricing one of the largest-ever yen bond deals by an overseas issuer.
Shares of Japan’s major trading houses jumped Tuesday after Buffett told the Nikkei newspaper that Berkshire had raised holdings in them to 7.4% from about 5% in 2020. Buffett said he was “very proud” of the investments, in a published transcript of the interview.
He added that while he doesn’t have a stake in other major Japanese companies, “there are always a few I’m thinking about,” Nikkei reported.
(Updates with relative pricing details throughout)
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