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Japan-Update

SoftBank readies multibillion-dollar bond issue

Hybrid bonds cushion balance sheet impact, help finance Vision Fund

TOKYO -- SoftBank Group will issue dollar-denominated bonds to raise capital for the company's technology investment fund established with Saudi Arabia and other partners, a vehicle that may reach as large as $100 billion over the next five years.

The Japanese tech company's bonds are expected to raise 300 billion yen to 500 billion yen ($2.64 billion to $4.41 billion), taking advantage of low interest rates. The debt will be issued as perpetual subordinated hybrid bonds, which have no maturity date and act similarly to equity. The company will seek investors in Europe and Asia.

The proceeds will be invested in the SoftBank Vision Fund, established in May, and allocated as business capital. The company plans to invest 3 trillion yen in the new fund, including 2 trillion yen to be raised over the next two to three years. The remainder will come from an in-kind contribution of 1 trillion yen worth of shares in British semiconductor company ARM Holdings, which SoftBank acquired last year.

SoftBank's consolidated interest-bearing debt totaled about 14 trillion yen at the end of March, four times more than the company's capital. Hybrid bonds reduce the harm to the balance sheet caused by issuing more debt.

The company plans to cover its capital for the fund by issuing more bonds in the future. The bonds will be denominated in yen and dollars, raising 1 trillion yen in each currency. Yen-denominated debt is expected to be issued as hybrid and straight bonds, mainly geared toward domestic investors. SoftBank will also borrow from banks and securitize receivables from mobile phone sales.

(Nikkei)

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