Exclusive-Kawasaki Heavy plans to raise $1.2 billion through new shares, CBs, sources say

Kawasaki Heavy Industries is preparing to raise around 200 billion yen, approximately $1.23 billion, through a combination of new share and convertible bond issuances. Sources familiar with the matter indicate the company is finalizing these plans, with a decision expected as early as this week.

The substantial capital raised is earmarked for significant investments in key growth areas. These include the development of aircraft engines, gas turbines, specialized robots for chipmaking equipment, and the burgeoning hydrogen supply chain. This strategic financial move aligns with Japan's national objective to bolster critical industries and enhance defense capabilities.

Convertible bonds, which offer the flexibility to be converted into shares at a set price without immediate dilution, are increasingly favored by Japanese corporations amid rising interest rates. Kawasaki Heavy's utilization of this instrument reflects a broader trend in corporate finance within the country.

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The company will decide on the issuance as soon as this week.

The company is actively pursuing collaborations to enhance its technological edge. Notably, Kawasaki Heavy is working with Nvidia to integrate artificial intelligence and robotics, and has established a development hub in Silicon Valley. Furthermore, a recent agreement with Airbus aims to explore a potential Japanese variant of the Eurodrone defense drone.

These initiatives position Kawasaki Heavy to benefit from Japan's push to strengthen its defense sector in response to heightened regional tensions. The company's established expertise in manufacturing aircraft, submarines, and missiles makes it a key player in the nation's strategic industrial landscape.

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The shares and convertible bonds will be sold mainly to overseas institutional investors.