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SoftBank

SoftBank loan plan draws mixed reaction from WeWork-wary banks

Mizuho shows interest while MUFG and Sumitomo Mitsui remain aloof

SoftBank CEO Masayoshi Son is looking for fresh funding from Japan's three megabanks -- Sumitomo Mitsui Banking, Mizuho and MUFG Bank. (Nikkei Montage/Source photo by Ken Kobayashi)

TOKYO -- SoftBank Group's push for a fresh loan to help save WeWork has elicited an uneven response from Japan's biggest banks.

While Mizuho Bank, the conglomerate's main lender, appears amenable to the idea, MUFG Bank and Sumitomo Mitsui Banking have adopted a more cautious stance. They are calling for retrenchment and asset sales to turn around the money-losing office sharer, on which SoftBank CEO Masayoshi Son has bet billions of dollars.

Sources close to the companies say Mizuho is leading talks on a joint financing deal that would be worth 300 billion yen ($2.76 billion). Separately, SoftBank is reportedly seeking a credit line, which would allow it to obtain loans up to a predetermined amount.

On Thursday morning, when the news of the talks broke, executives of the megabanks other than Mizuho sounded standoffish. "We cannot keep increasing loans forever," one said.

For at least one major lender, outstanding loans to SoftBank are already nearing the limit of what banks allow themselves to offer a single corporate group. Banks set such restrictions to protect themselves in case a single heavy borrower fails.

SoftBank's appetite for funds is exceptionally voracious for a Japanese company. The group's Z Holdings has launched a takeover bid for Zozo, the operator of online clothing retailer Zozotown, with the price expected to reach up to 400 billion yen.

Large lenders have agreed to finance the Zozo purchase with bridge loans, but one insider said his bank will need to ask SoftBank to "reduce the balance by shifting a portion to corporate bonds, for example."

Now that Z Holdings is also set to merge its Yahoo Japan operations with chat app Line, SoftBank's demand for funding may increase even further.

SoftBank Group's net worth totaled 9 trillion yen at the end of March. Even if its stake in The We Co., which runs WeWork, is impaired, the conglomerate's financial position is unlikely to deteriorate sharply, as it also has unrealized gains totaling over 10 trillion yen on its stake in China's Alibaba Group Holding.

Nevertheless, a bank executive said, "Maintaining discipline is an ironclad principle for banks."

On the other hand, a Mizuho executive expressed a degree of enthusiasm about the new loan. "It's not like we have more headroom before reaching the credit limit, but we need to devise a way to do it."

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