Warren Buffett’s Berkshire sells $1.2 billion in yen debt after big Japan gamble

(Bloomberg) — Berkshire Hathaway Inc. sold 164.4 billion yen ($1.2 billion) in bonds, paying some of the highest costs ever to sell debt in the currency, as speculation about the Bank of Japan’s policy tightening adds to the burden on issuers .

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Warren Buffett’s firm, one of the biggest foreign issuers of yen debt, paid higher spreads on all five tenors compared with a previous deal in December, while the all-in costs of Friday’s transaction reflected an even steeper jump in borrowing.

The firm’s five-year note is priced to yield 1.135%, according to an email from Mizuho Securities Co., one of the joint book-runners on the deal. That̵[ads1]7;s nearly seven times higher than what the Omaha, Nebraska-based company paid when it debuted in the yen bond market in 2019, underscoring that Japan has not been immune to the global rise in borrowing costs.

The deal came just days after the billionaire investor made headlines by saying he had increased stakes in Japanese trading houses. Berkshire lured yen bond investors with stronger credit ratings from Moody’s Investors Service and S&P Global Ratings than the credit rating agencies give to the Japanese sovereign.

But relatively speaking, Japanese borrowing costs remain low by global standards, but traders are betting the BOJ will follow global peers and end negative interest rates under new governor Kazuo Ueda.

“There is a strong possibility that the yen will strengthen as the BOJ has nowhere to go but up while disinflation elsewhere means global rates have peaked,” said Amir Anvarzadeh, a strategist at Asymmetric Advisors in Singapore. “Japanese stocks are cheap, and Buffett made a ton of money on the trades he bought in 2020.”

The proceeds from the offering will be used for general corporate purposes, including the refinancing of some debt, according to the issuer in a filing earlier this month. A ¥56.3 billion bond from Berkshire Hathaway matures on Friday.

Buffett’s conglomerate has sold about 1.2 trillion yen in debt, including today’s offering, since its debut sale in 2019.

The American company, which Buffett took control of in 1965, surprised Japanese markets in 2020 when it bought shares in local trading companies after pricing one of the largest-ever yen bond deals from a foreign issuer.

Shares in Japan’s major trading house rose on Tuesday after Buffett told the Nikkei newspaper that Berkshire had raised its stake in them to 7.4% from about 5% in 2020. Buffett said he was “very proud” of the investments, in a published transcript of the interview .

He added that while he doesn’t have a stake in other major Japanese companies, “there’s always someone on my mind,” Nikkei reported.

(Updates with relative price details throughout)

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