Rakuten Group’s Non-Fintech Cash, Proposed Bond-Type Share Issuance

Relevant Documents: Excel Tear Sheet $1.8 Billion 11.25% Senior Notes Due 2027 Offering Circular (OC) Q4’23 Strategy Presentation Q4’23 Appendix Presentation Reorg Asia Highlights: While Rakuten Group Inc., or Rakuten, has fully funded its November 2024 USD notes maturities through its $1.8 billion senior notes issuance in February, the ¥400 billion ($2.66 billion) of domestic retail bond maturities in the first half of 2025 remains a key rating overhang (S&P: BB, negative outlook); With the company’s share price indicated at close to 52-week highs, Rakuten is in a good position to raise new equity to fund its debt maturities and negative free cash flow, or FCF, of the mobile business and as it works towards its medium term target of a consolidated equity ratio of at least 10%; Rakuten’s non-fintech cash of ¥370 billion for 2024 (according to S&P) plus proceeds from the proposed issuance of up to ¥100 billion bond-type class shares is likely sufficient to cover projected negative FCF and net bond repayments of around ¥400 billion for full-year 2024; While self-funding projections appear optimistic, Rakuten’s mobile business has a visible path to profitability. Shortfalls may be funded by prospective asset monetization, which could include capital raising by[...]