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November 22, 2006 6:51 pm

Goldman quits Softbank pact

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Goldman Sachs has pulled out of the Y1,450bn ($12.4bn) refinancing for Softbank’s acquisition of Vodafone Japan, raising fresh concerns about the Japanese communications group.

Analysts say the US investment bank’s move to quit the lending syndicate suggests it has misgivings about the terms of the loan, which is supported by revenues from the mobile arm.

Its defection is likely to sour what has been a long and fruitful relationship with one of Japan’s most lucrative investment banking clients.

Softbank has been involved in more than $36bn worth of investment banking transactions in the past two years, according to Dealogic.

Goldman Sachs has participated in a number of these and one of its former Asia chiefs – Mark Schwartz – serves on Softbank’s board of directors.

“[Goldman] has effectively said, ‘right, we will never do business with Softbank again’,” said one investor.

Despite the setback, Softbank expects the refinancing to go ahead at the end of this month. Softbank said other lenders would fill the gap left by Goldman’s departure. The syndicate includes Deutsche, Citibank and Mizuho.

Goldman and other foreign banks are making a big push on leveraged loans, where they have pricing expertise and a greater appetite for risk than Japanese banks.

Goldman said on Wednesday it had no one available to comment on why it had withdrawn from the financing – a decision made some time after October 20 when Softbank announced the bank was “scheduled to participate”. Softbank had a poor showing in the war for mobile customers unleashed by number portability.

Since October 22, mobile customers have been able to change their carrier without changing number – intensifying competition in the industry.

Softbank had been hoping to exploit number portability – along with aggressive price cuts – to boost its market share.

Vodafone Japan was in last place among the three carriers when Softbank bought it, with a market share that was steadily falling.

Separately, Softbank said on Wednesday that Softbank Asset Management, a wholly owned subsidiary, had made a “correction” following an inspection by the tax authorities of its corporate tax in the period to March 2005.

Softbank was also forced to review advertisements for a new pricing plan launched on the eve of number portability, following an investigation by the Fair Trade Commission.

Its mobile rivals complained when, shortly after the start of number portability, computer problems blocked its subscribers from switching to competitors.

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