SoftBank will use telco shares as collateral to secure $4.5 billion in loans

SoftBank Group is seeking loans of $4.5 billion and is willing to offer collateral in the form of shares from its telco branch in return.

The financing agreement will go up to 500 billion yen ($4.5bn), with shares pledged from SoftBank Corp. In total, 16 domestic and overseas financial institutions have agreed to enter into the agreement which is expected to become concrete on February 25, 2020. 

Up to 953 million shares are on offer. 

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SoftBank says that the funding bid will treat the group as a "special" shareholder, and so "the share ownership and voting rights of SoftBank shares pledged as collateral will, in essence, continue to belong to SoftBank Group Japan Corporation (SBGJ)."

A company spokesperson told Reuters that the sought-after cash injection will be used to bolster operational cash flows and will also be used for "general business purposes."

In Q3 2019, SoftBank suffered a 225 billion yen operating loss. The company's Vision Fund consumed the better part of operating profit as some of the unit's 88 investments -- including Uber and Slack -- continues to be a loss-making venture. 

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SoftBank has also had to cope with the WeWork debacle in recent months. WeWork, recently renamed as We Co, is a working space rental company that intended to tap into a demand for flexible lease arrangements. 

The company did appear to capture the interest of individuals, startups, and enterprise firms alike. However, the tech unicorn had an overinflated valuation of $47 billion that vanished into the ether due to the erratic behavior of executes and a failure to generate profit. 

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SoftBank is a major WeWork investor, having poured roughly $10 billion into the company and ending up as the owner of the lion's share, causing severe financial losses. 

WeWork axed plans to launch an IPO last year.

Paul Singer's Elliott Management Corp. is a prominent Softbank investor and has quietly amassed a stake of over $3 billion. The investor has previously called for a share buyback of up to $20 billion.

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Previous and related coverage

• SoftBank Group looking to ride AI unicorns into the future
  
• Vision Fund sets Softbank back ¥225 billion in Q3
  
• WeWork and Uber drag SoftBank Group into historic negative territory
  

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