Nippon Steel to raise $3.6 billion in Japan's biggest convertible bond offer ever

By Katya Golubkova

TOKYO, Feb 24 (Reuters) - Japan's Nippon Steel 5401.T plans to raise 550 billion yen ($3.55 billion) via a convertible bond sale - the biggest in Japan's corporate history - as the company seeks to refinance its $15 billion takeover of U.S. Steel, which closed in June, and to fund business expansion.

Nippon Steel said in regulatory documents on Tuesday the bond issue was planned in two equal tranches of 275 billion yen, maturing in 2029 and 2031 respectively and bearing stock acquisition rights and zero coupon.

It added that it may increase the bond offering based on investor demand and market conditions and as it looks to invest 6 trillion yen over the next five years, including $11 billion in U.S. Steel, to fund the business growth.

Reuters reported earlier this month on Nippon Steel's plans for a convertible bond sale, citing sources, as the company seeks funding to replace a bridge loan it took out to buy U.S. Steel.

"By choosing convertible bonds over an equity offering, the company aims to limit immediate shareholder dilution," Jefferies analysts said in a note, describing the planned bond operation as the largest ever by any Japanese company.

"The funding plan marks a turning point that enables Nippon Steel to focus on overseas-led growth while balancing financial discipline," they added.

This month, Nippon Steel widened its net loss forecast for the financial year to end-March to 70 billion yen due in part to a fire at a blast furnace and because of charges related to its acquisition of U.S. Steel.

($1 = 155.0400 yen)