Nippon Steel will raise ¥30 billion through a loan with subordination provisions and borrow the funds from financial institutions on 11 September. The funds are expected to be used for the early redemption of bonds with subordination provisions issued in September 2019.
Nippon Steel announced that it will raise ¥30 billion through a subordinated loan as part of a new financing transaction. The borrowing is scheduled to be executed on 11 September, enabling the company to secure funds for the early redemption of hybrid bonds it holds. The proceeds will be used to facilitate the early redemption of bonds with subordination provisions, a financial instrument with equity-like characteristics.
Regarding assessments by the credit-rating agencies, 3 agencies, including Rating and Investment Information, Inc. (R&I), are expected to indicate that approximately half of the funds raised will receive equity credit. R&I is currently expected to assign a single-A-minus rating, suggesting that the nature of the funding structure will add an equity-like element to the company’s financial profile. The maturity is expected to be in 2061, indicating a move aimed at stabilising the company’s long-term capital structure.
The financing is positioned as part of the company’s financial strategy and is intended to increase its capital base and financing flexibility over the longer term. The proportion receiving equity credit is expected to increase, and depending on the credit-rating agencies’ assessments, the transaction could affect the market cost of capital. The document does not specify the borrowing terms or interest rate.