With U.S. markets in turmoil, the Oracle of Omaha is once again turning his gaze eastward, with Berkshire Hathaway Inc. BRK BRK planning a new round of Yen-denominated bonds, which it plans to invest primarily in five Japanese trading companies, in which it already maintains a sizable position.
What Happened: Berkshire Hathaway made new filings with the Securities and Exchange Commission (SEC) on Tuesday, announcing its intent to issue another round of Yen-denominated bonds, after naming Bank of America Securities BAC and Mizuho Americas as the lead managers of the issue.
The company’s filings neither mention the size of the issue nor the coupon rates just yet, and there is no clarity on how it plans to use the proceeds either, but there have been indications that Berkshire might use this to increase its holdings in Japan’s top 5 trading houses.
This includes Mitsubishi Corp, Mitsui & Co, Marubeni, Itochu, and Sumitomo Corp, adding to its $24 billion position in these companies.
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Berkshire first tapped into Japanese debt markets in 2019, attracted by the low interest rates, followed by several rounds each year since then. Its last issuance was in October 2024, when the company sold multitranch bonds worth $1.9 billion, and now this one marks its 10th Samurai (Yen) Bond issuance overall.
Berkshire has two Yen-denominated bonds maturing in April and August this year, so part of the proceeds might go towards refinancing them as well.
Why It Matters: The issue adds to Berkshire’s massive $130 billion debt pile, even as it hoards cash worth $330 billion, but the way it is structured makes a great deal of sense.
To start with, the 5 trading companies that Berkshire is interested in each have remarkably high dividend yields, significantly higher than the coupon rates on the bonds it has issued. Moreover, given that the Japanese Yen is constantly declining against the US dollar, issuing Yen-denominated bonds acts as a hedge.
Warren Buffett has long been an admirer of Japanese companies and their work culture, but strictly from a valuation perspective, the Japanese stock market is a lot more attractive currently, trading at 13.6 times earnings, compared to 25.3 times earnings in US stocks.
Berkshire has a momentum rating of 87% and a value rating of 71%, and is favorable for the short, medium, and long term. For more such insights, consider signing up for Benzinga Edge Stock Rankings.
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