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Berkshire Hathaway Inc. priced yen-denominated bonds on Thursday, joining a global surge in debt issuance during the past month by companies facing a worldwide recession.
The multi-tranche debt offering of 195.5 billion yen ($1.8 billion) is the biggest bond offering by a foreign issuer in the Japanese currency since Warren Buffett’s conglomerate tapped the market in September. While spreads on company debt have climbed everywhere amid the pandemic, they remain comparatively low in Japan and within ranges seen in 2019.
With economic activity in many nations being put on hold to contain the virus and save lives, borrowing costs for companies globally have surged as credit risks and rating downgrades pile up. Berkshire Hathaway priced 10-year notes at a spread of 105 basis points, more than double the 50 basis points it paid to sell similar-maturity notes a little over half a year ago.
Buffett, the chairman and chief executive officer of Berkshire Hathaway, said last month the effects of the virus and an oil shock were “a big one-two punch.” While his company made a number of opportunistic investments during the financial crisis, it has avoided large acquisitions in recent years as U.S. stocks hit record highs, leaving the firm with a $128 billion cash pile by the end of 2019.
Borrowers have been breaking debt issuance records in markets around the globe in recent weeks as they build out cash buffers to weather the recession and stockpile cash for potential acquisitions. Almost 50 issuers priced about $117 billion in the U.S. investment-grade bond deals last week, shooting past a record set only the previous week.
The size of Berkshire Hathaway’s yen debt sale this time is less than half its inaugural 430 billion yen offering priced in September, which was as one of the biggest ever by a foreigner issuer in the Japanese currency. The company’s yen bonds are expected to be rated AA by S&P Global Ratings and at a comparable level by Moody’s Investors Service.
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