Kawasaki Heavy plans to raise $1.2 billion via new shares and convertible bonds, sources say

Airbus SE

Today 04:53

Shares, CBs to be mainly sold to overseas investors, says source 
CBs increasingly popular with Japanese companies
Shares fall 7% following news of plan to raise funds
Adds company statement, share reaction, data about convertible bonds
By Miho Uranaka and Sam Nussey

    TOKYO, July 1 (Reuters) - Japan's Kawasaki Heavy Industries 7012.T is finalising plans to raise about 200 billion yen ($1.23 billion) by issuing new shares and convertible bonds to fund capital expenditure, according to two sources familiar with the matter. 
The company will decide on the details of the issuance as soon as this week, the sources said. The shares and convertible bonds will be sold mainly to overseas institutional investors, one of the sources said.
The plan to raise funds has not been reported earlier. Kawasaki Heavy said in a statement it is considering various capital strategies including issuing new shares and bonds but nothing has been decided. The sources declined to be named as the information is not public.
Kawasaki Heavy's shares pared gains and were down 7% in Tokyo as investors fretted about the potential dilution impact. 
Kawasaki Heavy is investing in areas including aircraft engines, gas turbines, robots used in chipmaking equipment and the hydrogen supply chain, as the government plans to beef up key sectors as well as the country's defences.

CONVERTIBLE BONDS INCREASINGLY POPULAR 
Convertible bonds, which can be converted into shares later at a predetermined price and avoid immediate dilution, are becoming increasingly popular among Japanese companies as interest rates rise.
Eight Japanese companies have raised almost $7 billion this year by issuing convertible bonds as of June 17, according to LSEG data. That is the highest in more than two decades. 
Companies issuing convertible bonds this year include Nippon Steel 5401.T, which was the largest in Japan's corporate history, and  JX Advanced Metals 5016.T.
Several more companies are planning to issue convertible bonds, a banker said.

GROWING DEFENCE SPENDING 
Prime Minister Sanae Takaichi is targeting more than 370 trillion yen in investment through fiscal 2040 across 17 strategic sectors including AI and chips — an ambition that Kawasaki Heavy CEO Yasuhiko Hashimoto has said offers opportunities for the company.
Kawasaki Heavy is collaborating with companies including Nvidia NVDA.O to integrate AI and robotics and last month announced a development hub in Silicon Valley. Last week, it signed an agreement with Airbus AIR.PA to cooperate on a possible Japanese variant of the Eurodrone defence drone. 
Kawasaki Heavy makes aircraft, submarines and missiles and is also expected to benefit from Japan's military expansion amid heightened regional tensions.
The company's sales and profit hit an all-time high in the year ended March and it expects business profit to reach a record 170 billion yen in the current fiscal year.     
 ($1 = 162.2400 yen)

 (Reporting by Miho Uranaka and Sam Nussey; Additional reporting by Maki Shiraki and Rocky Swift; Editing by Chang-Ran Kim and Muralikumar Anantharaman)
 ((sam.nussey@tr.com;))