SoftBank draws strong demand for new bond issue

Thu Apr 18, 2013 2:45pm EDT

April 18 (IFR) - Despite the uncertainty surrounding Dish Network's rival offer for Sprint Nextel earlier in the week, SoftBank successfully priced its dual-currency bond offering on Thursday at a significant upsize and on the tight end of talk.

In a global effort via left lead Deutsche Bank, SoftBank raised the equivalent of US$3.3bn in US dollar and euro seven-year senior bullet notes, up from an original US$2bn size.

The deal was split into US$2.485bn in 4.50% notes due 2020 and another 625m in 4.625% notes due 2020. Talk on both tranches emerged Wednesday at 4.5%-4.75%, which was even tight of initial price thoughts of 4.625%-4.875%.

The notes traded up to 101.25 bid.

The successful execution defied some predictions earlier in the week that SoftBank would have to sweeten the terms or postpone the bond offering altogether after Dish made its surprise bid for Sprint Nextel on Monday.

Dish offered to buy Sprint for US$25.5bn in cash and stock, topping SoftBank's own bid for the wireless telecom provider by more than US$5bn.

SoftBank said on Tuesday that it still expects to complete the acquisition by July, and that it believes its offer is superior.

Yet it is unclear if the company will increase its offer for Sprint, do nothing or walk away. It has roughly US$12bn of cash on its balance sheet, access to its local Japanese market for financing - and has already made a profit from a currency hedge on Sprint. So it is not expected that it will tap the US high-yield market for any additional debt pertaining to the acquisition.

The company also raised a retail bond in Japan in February and is doing the equivalent of a US$20bn loan in the local Japanese that equates to roughly 2.75%-3% yield, it was heard.

For the bond that priced today, SoftBank held a roadshow in the US, Europe and Asia over the course of a week and a half, with leads garnering broad participation from all regions to allow for the upsize.

Despite some skittishness on the part of investors following the Dish offer, along with general market weakness, the deal was still heard to be multiple-times oversubscribed.

The company and underwriters were able to market through concerns about an increase in leverage if SoftBank has to increase its offer for Sprint, along with questions about its pathway back to investment grade given the new developments.

The book included roughly 60%-70% high-yield accounts, with 30%-40% going to investment grade accounts, it was heard.

Even though it is cheaper for SoftBank to raise money in Japan, the company decided to raise US dollar and euro bonds to establish a global presence as part of its acquisition of Sprint.

For the company, US dollar bonds are more economical as it can swap them back to yen at a cheaper rate. But SoftBank also wanted to have a benchmark sized bond in Europe.

The bonds are currently rated Baa3/BBB. S&P, which has the company on CreditWatch negative, said its ratings will likely be lowered to a high-yield BB+ (from its current investment-grade rating of BBB) if the Sprint transaction proceeds. Moody's also placed its Baa3 issuer rating, the lowest investment-grade rating, under review for possible downgrade pending SoftBank's acquisition of Sprint.

Deutsche Bank, BofA Merrill, Credit Agricole, Mizuho, Morgan Stanley and Nomura were joint bookrunners on the dollar tranche, while Deutsche Bank, Credit Agricole, Mizuho and Nomura are joint bookrunners on the euro tranche. Barclays is no longer on the SoftBank financing team and is now lead adviser on Dish's bid.

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California state worker Albert Jagow (L) goes over his retirement options with Calpers Retirement Program Specialist JeanAnn Kirkpatrick at the Calpers regional office in Sacramento, California October 21, 2009. Calpers, the largest U.S. public pension fund, manages retirement benefits for more than 1.6 million people, with assets comparable in value to the entire GDP of Israel. The Calpers investment portfolio had a historic drop in value, going from a peak of $250 billion in the fall of 2007 to $167 billion in March 2009, a loss of about a third during that period. It is now around $200 billion. REUTERS/Max Whittaker   (UNITED STATES) - RTXPWOZ

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