Pedestrians walk past a SoftBank Group Corp. store in Tokyo, Japan. (Photographer: Yuya Shino/Bloomberg)

SoftBank Takes Small Step to Reduce Giant Debt With Bond Buyback

(Bloomberg) -- SoftBank Group Corp. bonds jumped after the company offered to buy back its notes, in a small step by billionaire Masayoshi Son’s firm to cut its massive debt pile.

The company said it plans to purchase $750 million worth of outstanding dollar- and euro-denominated notes, and will pay with cash on hand. SoftBank’s 3.125 percent euro bonds due 2025 jumped 1.3 cents to 94.4 cents as of 1:48 p.m. in Tokyo, the sharpest increase since July, and its other securities rose as well, according to Bloomberg-compiled prices.

SoftBank has about 16.6 trillion yen ($152 billion) of total consolidated debt, as Chief Executive Officer Son transforms the company into a giant investment fund. Last month the firm also raised 2.35 trillion yen in an initial public offering of the telecommunications business known as Softbank Corp. to further fuel a tech-focused spending spree that already includes stakes in Uber Technologies Inc. and WeWork Cos.

Here are insights from investors and analysts on the debt buyback:

Takahiro Oashi, a senior fund manager at Asahi Life Asset Management Co.:

  • This is positive overall for its finances, although the effect is limited by the size of the tender offer.
  • The bond buyback is unlikely to be the start of a trend though
  • “If they have money, they’ll invest it,” Oashi said. “They want to maximize the use of debt. That’s the impression you get from listening to Son.”

Katsuyuki Tokushima, chief fixed-income analyst at NLI Research Institute:

  • Any step to reduce the interest payments on its huge debt pile is welcome, although this is a small one. “It’s better than nothing.”

Toshiyasu Ohashi, chief credit analyst at Daiwa Securities Co.:

  • The tender offer will bring down SoftBank’s debt-to-value ratio, which he sees as the major metric for estimates of its creditworthiness, writing in a note to clients
  • Such a move was needed after a decline in its shares reduced its market capitalization
  • If SoftBank can buy the securities below par, that would also be positive from an income-and-expenditure standpoint
    • A SoftBank spokesman said that the company will prioritize purchases at under par

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