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SoftBank Finalizing $4 Billion Loan From Apollo-Led Group

SoftBank Finalizing $4 Billion Loan From Apollo-Led Group
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People familiar with the matter said the loan would be secured through SoftBank’s Second Vision Fund. That $40 billion includes stakes in 150 companies such as Indian e-commerce giant Flipkart. Revolut Digital Banking Startup; and Cameo, a site where celebrities sell personal messages. One person said SoftBank could use the money for a range of purposes.

The deal between the investment giants shows SoftBank’s urgent need for liquidity and highlights Apollo’s push toward lending, an area traditionally dominated by banks.

Using borrowed money to make investments, rather than its own money, would increase SoftBank’s profits if those bets turned out to be winning — and magnify losses if they tormented.

SoftBank, whose holdings range from Japanese telecom companies to European chip makers and Silicon Valley startups, has tapped into its various holdings for borrowing. Last spring, it arranged an $8 billion loan from a group of banks to guarantee its stake in Chinese e-commerce giant Alibaba Group Holding. Ltd.

The initial Vision Fund, launched in 2016 with around $100 billion, was the largest pool ever raised for private investment. SoftBank has spent it at a fast pace – on everything from transportation apps including Uber Technologies company

For inland farming startups and AI companies. They are known to bet heavily on WeWork Inc. , a joint-venture company that caught before its eventual listing.

The fund relied heavily on financial leverage, with $40 billion of its capital coming in the form of 7% interest-bearing preferred shares owned by Abu Dhabi’s sovereign wealth fund, Mubadala Investment Company, and the Public Investment Fund of Saudi Arabia. The preferred stock had the effect of amplifying gains and exacerbating losses.

The sequel fund was set to be larger, but outside investors stayed away, disappointed by bad bets like WeWork and the chaotic way the Vision fund was operating. Instead, SoftBank has had to rely on its own money to make investments, but it hasn’t stopped the fund from investing at a pace that shows no sign of giving up.

This cash was in short supply. In November, SoftBank reported a quarterly loss of $3.5 billion, impacted by China’s crackdown on technology companies. Its stake in Didi Global, a Chinese passenger services company company ,

for which it paid $12 billion and valued at $7.5 billion. The stake in Alibaba, its largest, has halved over the past year. In total, SoftBank’s asset value decreased by $54 billion from the previous quarter.

“We are in the middle of a snowstorm,” SoftBank CEO Masayoshi Son told reporters.

In another setback, the US Federal Trade Commission filed a lawsuit this month to ban Nvidia corp

The proposed acquisition of SoftBank’s semiconductor design firm Arm Holdings, arguing that the deal was uncompetitive.

SoftBank has pledged to spend at least $9 billion to buy back its shares, which have lost about half of their value since February. This buyback is on top of a $20 billion share buyback program completed earlier this year.

As of the end of September, SoftBank estimated its second Vision Fund at $38 billion. Several of its holdings have recently been released to the public, including Chinese grocery startup Dingdong Ltd.

and AutoStore Holdings Robotics Ltd.

Apollo and the insurance company Athene Holding Ltd.

ATH 4.84%

, a plan to lead the SoftBank loan, which will carry a single-digit interest rate, will be joined by a group of investors including mutual funds, endowments and financial institutions, one of the people said.

Interest in making large loans to asset managers and private equity firms is growing. Last year, Apollo led a $4 billion bankruptcy loan to Hertz Global Holdings company

In partnership with Athena. In October, executives said Apollo was on track to provide 30 loans worth more than $1 billion this year, up from one in 2019.

Apollo and some of its peers are often able to guarantee complex deals that the bank won’t touch because they don’t quite fit into a specific category. While most private equity funds use leverage to make deals, Vision’s SoftBank fund invests in early stage companies that don’t typically generate cash flow to support debt.

Apollo, which expects to close a deal in January to buy a piece of Athene it doesn’t already own, needs a steady supply of new debt deals in which it invests insurer assets.

Athens said on Monday it would buy a company that finances clean energy projects in commercial real estate, the latest in a series of similar deals for lenders it struck this year. This summer, Apollo was runner-up to GreenSky LLC, a home improvement and pharmaceutical lender being sold to Goldman Sachs Group. company ,

People familiar with the matter said.

write to Liz Hoffman at liz.hoffman@wsj.com and Miriam Gottfried at Miriam.Gottfried@wsj.com

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