SoftBank has 'no immediate plans' to issue debt for ARM deal

By Robert Smith and Laura Benitez

LONDON (IFR) - SoftBank Group said it has "no immediate plans" to issue fresh debt to back its acquisition of UK chip designer ARM Holdings for £24bn.

SoftBank plans to finance its largest acquisition with ¥2.3trn (£16.3bn) of cash on hand and a ¥1trn (£7.1bn) bridge loan from Mizuho, according to a conference call on Monday. The bridge loan matures in July 2018.

Debt investors had initially anticipated a jumbo bond to take out the bridge loan, but a representative of SoftBank said this was not imminent, in response to a question on the call.

"No immediate plans," he said. "We have a one trillion [yen]bridge loan from Mizuho and the rest is cash, in terms of how this deal is being financed."

The Japanese telecoms and tech firm last tapped the international debt markets a year ago when it printed a €2.25bn and US$2bn deal in July, which included a 12-year euro tranche, its longest bond to date.

"I was looking forward to (another) jumbo deal," said one high-yield bond investor after SoftBank confirmed it had no plans to tap the market imminently.

SoftBank has US$70bn-equivalent of debt outstanding, including US$29bn at US subsidiary Sprint. It is rated Ba1/BB+ by Moody's/S&P, but on the call chairman and chief executive Masayoshi Son said he considers the company "already investment grade", as the large publicly-listed equity stakes it holds mean it has "virtually, effectively no net debt".

"Yoda says in Star Wars 'Listen to the force'. If you listen to the force, this is the best company to invest in the debt," he said.

Son also addressed the heavy debt burden at Sprint, stating that the telecoms firm would be free cashflow neutral or positive by "the end of this year or beginning of next year".

"Sprint is becoming self-sufficient now, that's why it gives me room to consider the next big move," he said. "If it was last year I wouldn't consider this (acquisition), as I had to focus on turning around Sprint."

The US firm is the largest issuer in the US high-yield market and some of its bonds slumped to cash prices in the low 60s and high 50s in January, caught in the crosshairs of a sharp sell-off in junk-rated debt.

While SoftBank has helped Sprint raise lease and spectrum financing, Son ruled out the possibility of providing additional capital to the US company when asked on the call.

"It does not even need SoftBank additional funding, it is self-sufficient, so why do you need to even discuss that?" he said.

(Reporting by Robert Smith and Laura Benitez, editing by Sudip Roy, Julian Baker)