Shares in Softbank, the internet and telecoms conglomerate, soared almost 4 per cent on media reports that it was considering raising about $12bn by securitising cashflow from its mobile unit, Vodafone Japan.
Securitisation of individual businesses is rare in Japan, particularly on such a large scale.
The deal may help Softbank manage its mounting debt since securitised debt can be issued at higher credit ratings and hence incur lower rates of interest. Softbank has been given upper-grade junk-bond status by international rating agencies.
However, it would divert cash from investment needed to reverse Vodafone Japan’s declining share of the mobile market. Vodafone is the number three network in Japan and surveys suggest its decline in market share could accelerate after carriers introduce number portability next month – a change that will allow customers to switch providers without changing phone numbers.
Softbank’s shares still rose 3.8 per cent to Y2,190 on the news – bucking the general decline in the Japanese market.
In one of the few Japanese precedents, Gaia, Japan’s third-biggest operator of pachinko – a pinball-like game that is big business in Japan – securitised the revenue from 31 parlours last year. It raised Y70bn ($598m) in the deal arranged by Deutsche Bank and was given a single-A rating in December by S&P. It was the first business securitisation ever rated in Japan by S&P.
Softbank bought Vodafone Japan for Y1,800bn after borrowing Y1,300bn in short-term bridge loans. The company currently has about Y2,200bn of net debt.
Despite the share price rise, shares in Softbank remain more than 40 per cent down since it announced the purchase of Vodafone in March.
Softbank is headed by Masayoshi Son, a bold entrepreneur who has turned the telecoms and internet conglomerate into one of the most popular stocks in Japan. The company has been hit recently by news that Mr Son used his personal holdings in Softbank as collateral for loans. The share price has also suffered because of concerns that it might have overpaid for Vodafone’s struggling Japanese assets and worries over its accounting practices.
The company declined to comment on the media reports of securitisation but said it would issue €500m ($634m) in euro-denominated bonds, maturing in 2013, to help pay back its short-term loans.