Sony selling $1.9B of convertible bonds to expand

The Japanese firm plans to raise funds for acquisitions and expansion of imaging-sensor facilities, through zero-coupon convertible bonds maturing in five years.
Written by Ryan Huang, Contributor

Japanese electronics giant Sony plans to raise 150 billion yen (US$1.9 billion) through a sale of convertible bonds to help finance a series of investments. 

The company is issuing zero-coupon convertible bonds maturing in five years to fund acquisitions and the expansion of imaging-sensor facilities, according to its press release [PDF] Wednesday.

Zero-coupon bonds, as the name suggests, do not pay a periodic coupons or interest, but are usually instead redeemed for profit at full maturity. The convertible feature allows the bonds to be converted into common stock at a certain price--in this case at 957 yen or 10 percent above yesterday's closing price.

The sale is the first convertible bond from Sony since 2003, noted Bloomberg.

"Convertible bonds was probably the only option for Sony," Tadashi Fujii, an analyst at research company Fisco, told the newswire.

He pointed out the Sony's credit ratings had been cut and an equity finance approach would have led the share prices  to decline much more because of the dilution.

sony business break down
Sony business 2012 breakdown (source: www.sony.net)

The bond issue comes as it claws its way back to a recovery after losing US$5.7 billion last year. In its second quarter results released earlier this month, it narrowed losses to US$15.5 million, compared with US$27 million a year ago.

The company had last month closed operations at one of its Japan factories and cut another 2,000 jobs.

Sony was worth more than US$120 billion in 2000, and is now valued at about US$11 billion, according to Bloomberg. This compares with Apple valued at US$511 billion and Samsung Electronics at US$184 billion, it added.

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