Japan's Kawasaki Heavy Industries (7012.T), opens new tab 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, 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), opens new tab, which was the largest in Japan's corporate history, and JX Advanced Metals (5016.T), opens new tab. 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), opens new tab 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), opens new tab 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.
