SoftBank Borrows $8B, Backed by Its Stake in Alibaba, Say Sources

By , and | April 6, 2018

SoftBank Group Corp. borrowed about $8 billion through a margin loan backed by its Alibaba Group Holding Ltd. stake as the Japanese technology giant aims to bolster its financial flexibility, according to people familiar with the matter.

The loan, guaranteed only by the Alibaba holding, won’t be reflected in the group’s debt and may help shield against a potential ratings downgrade, the people said, declining to be identified as the discussions are confidential. The new financing may also remove an obstacle to the listing of its domestic telecommunications unit SoftBank Corp., which had been used as collateral for its earlier debt, one of the people said.

Bank of America Corp., BNP Paribas SA, Citigroup Inc., Deutsche Bank AG, Goldman Sachs Group Inc., JPMorgan Chase & Co., Morgan Stanley, Nomura Holdings Inc., Societe Generale SA and UBS Group AG were among the lenders on the deal, the people said.

SoftBank couldn’t immediately be reached for comment. Representatives for Bank of America, Goldman Sachs, Morgan Stanley, Nomura and BNP Paribas declined to comment, while the other lenders either didn’t return calls and emails, or didn’t immediately comment.

The participation of Wall Street’s top banks and European lenders in the financing reflects their continued appetite for such debt tied to blue-chip firms, despite the losses suffered by banks on a margin loan linked to Steinhoff International Holdings NV. The retailer has lost more than 90 percent of its market value following disclosures at the end of 2017 of accounting errors that dated back several years.

A successful IPO of SoftBank’s mobile-phone unit — possible only after the division proves its independence by canceling debt guarantees — could help the parent raise capital and relieve some of its debt burden, which reached 15.8 trillion yen ($147 billion) at the end of last year. A Tokyo listing could raise more than 2 trillion yen, people with knowledge of the matter said this year.

Billionaire founder Masayoshi Son, who has said he aims for a listing within a year, is seeking to separate SoftBank’s activities into investing and telecommunications arms as it branches out into businesses ranging from ride-hailing to insurance.

SoftBank Group’s debt risk last month jumped to the highest in almost two years following a successful exchange of its dollar- and euro-denominated bonds for new securities, allowing the mobile-phone unit to release its loan guarantee. That swap eases the way for the IPO, prompting concern among bondholders that the unit’s listing may reduce the amount of cash flow for the parent company.

In a margin loan, a borrower secures the debt by pledging an asset with the understanding that they’d need to pay up if the value of the collateral declines. The lender can typically sell some of the collateral if the borrower is unable to provide the cash. Banks compete for these deals because of the fees associated with structured financing.


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