TOKYO – Berkshire Hathaway, an investment group led by Warren Buffett, is preparing to issue yen-denominated bonds, its third such fundraising, Nikkei learned Monday.
Berkshire raised 430 billion yen ($ 3.9 billion) from its first yen bond issue in 2019 and 195.5 billion yen on its second issue in 2020.
The latest round is also expected to reach billions of dollars.
The terms of issue will be decided on Thursday. The funds are expected to be raised through the issuance of 5, 10, 15 and 20 year notes subscribed by BofA Securities, JP Morgan Securities and Mizuho Securities.
Berkshire Hathaway announced its stake in the five major Japanese trading houses after the second bond issue. The new bond issue has sparked talks that the U.S. investment firm would increase its stakes in these companies, causing Marubeni and Mitsui’s shares to rise 4% at one point in Monday’s trading.
Buffett often holds stocks for long periods of time and makes investment decisions based on the value of companies to their cash flows. Its portfolios are believed to be made up of big names, including Coca-Cola and American Express.
However, the holdings of such value-for-money stocks have decreased as investment has flowed into the United States. Buffett has therefore expanded his investments into Japanese stocks to increase revenue generating opportunities, according to some observers.
“If you source low-yielding yen-denominated corporate bonds and then buy stocks with low volatility and high dividend yields, you will almost certainly make a profit,” said Fumio Matsumoto, chief strategist at Okasan Securities, referring to Berkshire Hathaway’s investment strategy Japan.
The dividend yield on trading house stocks is around 2 to 4%. The coupon on Berkshire Hathaway’s 40-year bond, which was the longest of the most recently issued bonds, was 2%.
When Berkshire announced its investment in traders last August, it said it would hold the stocks for a long time. It also said it would consider increasing its stake in each of these trading houses from 5% to 9.9%. This could be done with the yen-dominated funds that Berkshire Hathaway is raising this round.