Japan’s SoftBank says it may issue $9.8 bn in hybrid bonds

Japan’s SoftBank Group on Tuesday said it is considering selling around 1 trillion yen ($9.8 billion) worth of hybrid bonds in its current financial year through March to bolster its capital base and secure funds for future growth.

The announcement comes after the telecommunications and internet company agreed to buy British chip designer ARM Holdings PLC for $32 billion.

The money raised from the bonds would not be used for the ARM deal, as the company plans to finance that acquisition with cash at hand and a 1 trillion yen bridge loan from Mizuho Bank, a SoftBank spokesman told Reuters.

The Nikkei business daily reported earlier on Tuesday that SoftBank would issue half of the total to individual investors with a coupon of around 3 percent.

Hybrid bonds are often treated as quasi-equity by credit-rating firms, and so will allow SoftBank to raise capital without hurting its rating.

A manager at a midsize brokerage firm told Reuters that increasing interest-bearing debt was not an option for SoftBank because that would lead to credit downgrades as it did after the acquisition of US mobile unit Sprint Corp.

As SoftBank has raised 1 trillion to 1.55 trillion yen annually over the last few years, “it could issue foreign bonds of around 500 billion yen (on top of the 1 trillion yen under consideration),” the manager said.