TOKYO -- SoftBank Group on Wednesday said it will raise up to 500 billion yen ($4.5 billion) from 16 domestic and foreign lenders by pledging a chunk of its mobile unit's shares as collateral, marking the tech conglomerate's first concrete response to U.S. activist investor Elliott Management's demand to boost share buybacks.
SoftBank currently owns 3.18 billion shares, or a stake of about 66%, in the Japanese mobile unit SoftBank Corp. through a wholly owned subsidiary. That subsidiary will transfer 953 million shares, worth about 1.42 trillion yen based on their closing price on Wednesday, to a newly formed SoftBank subsidiary.
The transferred shares will then be pledged as collateral. The loan has a tenor of two years and a one year grace period. The interest rate and other terms were not disclosed.
The size of the loan may change depending on the fluctuation of SoftBank Corp.'s stock price.
SoftBank said the move is intended to expand the group's cash position but declined to elaborate.
The announcement comes after Elliott reportedly acquired a more than a $2.5 billion stake in SoftBank. The activist investor is said to be pushing for $20 billion in share buybacks as well as governance changes.
At SoftBank's earnings conference last week, CEO Masayoshi Son said his thinking on buybacks is "basically aligned" with Elliott's, adding the timing and size will depend on factors such as the corporation's credit rating.
SoftBank, known for employing complex financial maneuvers to fuel Son's aggressive investments, devised a similar scheme to borrow about $9 billion using Alibaba shares as collateral. One major benefit for SoftBank is that it classifies the margin loans as non-recourse, which means it is not liable for the loan in case of default.
When its non-recourse loans are included, SoftBank has about 17 trillion yen in debt.