SoftBank will sell bonds to continue its expansion

SoftBank, the Japanese wireless carrier led by billionaire Masayoshi Son, plans to sell bonds for the first time after it abandoned talks to merge Sprint with T-Mobile.

Son’s company is offering 400 billion yen ($3.9 billion) of five-year notes to individual investors, and will price the debt on Aug. 28, it said in a filing to the Ministry of Finance yesterday. The coupon will be in a range of 0.95 percent to 1.55 percent, according to the filing.

The debt sale suggests Son’s failure to make the U.S. acquisition hasn’t damped his drive to raise funds to expand. Sprint, controlled by SoftBank, ended talks with T-Mobile less than two weeks ago on regulatory concerns, a person with knowledge of the matter said, leaving Son with the U.S.’s No. 3 carrier in a market where it is dwarfed by larger rivals.

“If it’s simply that SoftBank is raising funds at a cheap rate to refinance higher-cost debt, that would be extremely good” from a credit perspective, said Yusuke Ueda, a Tokyo-based credit analyst at Bank of America Merrill Lynch. “But that isn’t 100 percent sure, and we don’t know how much will be used for refinancing.”

The funds will be used to repay debt and to finance future investment, SoftBank spokeswoman Mariko Osada said by phone from Tokyo. The cash raising isn’t to finance specific mergers and acquisitions, she said.

SoftBank sold 300 billion of five-year bonds to individual investors with a 1.45 percent coupon in May after marketing the notes initially at 1.15 percent to 1.75 percent, according to data. It issued 700 billion yen of notes to individuals last year, as well as 120 billion yen to institutional investors, the data show.

The cost to insure SoftBank’s bonds against non-payment has dropped eight basis points this month to 172 basis points, according to data provider CMA. The Markit iTraxx Japan credit-default swap index rose 2.7 basis points during the period. A basis point is 0.01 percentage point.

Yoshimitsu Goto, an executive corporate officer at SoftBank, said the company plans to continue to sell aggressively to individual investors.

“Corporate bonds still only make up a small portion of investments among individuals,” Goto said in Tokyo on Aug. 8. “Japanese companies tend to have a high ratio of bank loans, but diversification is important.”

Of 1,630 trillion yen in financial assets held by Japanese households at the end of March, only 1.8 percent was invested in bonds compared with 7.6 percent in the United States, according to Bank of Japan data. Fifty-three percent of the Japanese funds were in cash and deposits and 9.1 percent were in shares.

SoftBank ended its efforts to take over fourth-biggest U.S. carrier T-Mobile as regulators remained skeptical that any potential benefits would be worth allowing the number of nationwide carriers to shrink below four. Verizon Communications and AT&T are the top two wireless carriers.

Bloomberg