SoftBank Climbs on Plan to Borrow $4.5 Billion Via Telecom Stock

(Bloomberg) -- SoftBank Group Corp.’s stock climbed after it unveiled plans to borrow as much as 500 billion yen ($4.5 billion) by putting up shares of its Japanese telecom unit as collateral, raising capital for the investment giant’s operations.

The money for the two-year loan, which will have a one-year extension option, will come from 16 financial institutions, SoftBank said in a statement. It pledged as much as 953 million shares of SoftBank Corp. and said the money will be used to fund operations. SoftBank Group’s stock rose as much as 3.6% in Tokyo, while the unit’s was little changed.

Activist investor Paul Singer this month revealed his firm had acquired a stake of as much as $3 billion in SoftBank and has advocated for a share buyback of as much as $20 billion, along with governance changes and more transparency about its investments. SoftBank founder Masayoshi Son called Singer’s Elliott Management Corp. an “important partner” and said he is in broad agreement with the investor about SoftBank buybacks and share value.

SoftBank will need to raise cash to meet those demands. Son is adopting a more conciliatory stance just as he’s struggling with the $100 billion Vision Fund, which made him the biggest investor in technology. The fund lost money in the three months ended in December, one quarter after the meltdown at WeWork triggered a record loss for the Japanese company. Son is trying to raise capital for a second fund, but last week said he is no longer targeting $108 billion and SoftBank may finance the effort on its own.

“We sense that the stars are now aligned for the firm to conduct a buyback,” Citigroup Global Markets analyst Mitsunobu Tsuruo wrote. SoftBank “will be in a position to flexibly implement a buyback amounting to” about 5% of its market capitalization.

Read more: SoftBank’s Son Considers a ‘Bridge’ Fund Before Vision Fund 2

The past 12 months have been tumultuous for Son and SoftBank. A year ago, the company unveiled a record buyback, sparking a rally that pushed shares to the highest since its dot-com peak in 2000. Uber Technologies Inc.’s disappointing public debut and the implosion of WeWork wiped out the gains over the next few months. But SoftBank surged again this month after Singer disclosed his stake and Son won approval to sell his Sprint Corp. to T-Mobile US Inc.

SoftBank has 13.75 trillion yen of interest-bearing debt, with more than 2.6 trillion yen of bonds coming due in the next three years. The company also had 3.8 trillion yen of cash and equivalents as of the end of December.

To contact the reporter on this story: Pavel Alpeyev in Tokyo at palpeyev@bloomberg.net

To contact the editors responsible for this story: Peter Elstrom at pelstrom@bloomberg.net, Edwin Chan, Colum Murphy

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