Nippon Steel, Japan’s largest steelmaker, has successfully raised approximately $3.9 billion through an upsized offering of convertible bonds. The substantial funding aims to repay loans incurred for its high-profile acquisition of United States Steel Corp. This move marks the largest convertible bond issuance of its kind in Japan, signaling a strategic financial maneuver by the company.
Nippon Steel announced its intention to sell nearly $4 billion in convertible bonds, an offering that ultimately reached 600 billion yen. This issuance is the largest ever by a Japanese corporation. The bonds are structured in two tranches, with half maturing in 2029 and the remainder in 2031. The company sought to raise 550 billion yen initially but increased the amount due to strong demand. This strategy highlights Japanese companies’ pursuit of more cost-effective funding compared to traditional debt.
The primary purpose of this significant bond sale is to refinance the loans taken out for the acquisition of U.S. Steel. In addition to managing acquisition debt, Nippon Steel plans to invest 6 trillion yen over the next five years to drive growth. The company is attempting to refinance its acquisition while simultaneously allocating substantial capital for future expansion.
Despite the successful fundraising, Nippon Steel’s shares fell sharply in Tokyo trading following the announcement. The stock experienced a decline of up to 6%, underperforming the broader Nikkei 225 index. Investors expressed concerns about potential dilution of shareholder value, as convertible bonds can be exchanged for company stock at a predetermined price. The sheer size of the bond issuance also added to market anxieties, particularly in light of Nippon Steel widening its net loss forecast for the current fiscal year. This widened forecast was attributed to factors including a fire at a blast furnace and costs associated with the U.S. Steel acquisition.