Softbank to sell $5 billion mandatories exchangeable into Alibaba, to yield 5.25%-5.75%, up 17.5%-22.5%

By Rebecca Melvin

New York, May 31 – Softbank Group Corp. plans to price $5 billion of mandatory securities exchangeable into Alibaba Group Holding Ltd. stock after the market close on Wednesday that were being talked to yield 5.25% to 5.75% with an initial exchange premium of 17.5% to 22.5%, according to market sources.

The exchangeables will be sold via Mandatory Exchangeable Trust, a newly formed, independent trust incorporated in the United States.

Under a collateral agreement, a wholly owned subsidiary of Japan’s Softbank Group Corp. called West Raptor Holdings, LLC will initially pledge a number of ordinary shares underlying the maximum number of American Depositary Shares deliverable upon maturity of the exchangeables under the forward purchase agreement.

The shareholder may elect to deliver in whole or in part cash instead of ADSs.

The Rule 144A exchangeable deal has a 20%, or $1 billion, greenshoe and is being sold via joint bookrunners Morgan Stanley & Co. LLC and Deutsche Bank Securities Inc.

Proceeds will be used to pay the purchase price to the shareholder under the forward purchase agreement and to purchase a portfolio of stripped U.S. Treasury securities with face amounts and maturities corresponding to the quarterly distributions.

The offering is part of a series of transactions which Softbank will use to monetize part of the stake in Alibaba held by its subsidiary SB China Holdings Pte. Ltd.

Also included in the minimum $7.9 billion monetization is the sale of $2 billion of Alibaba ordinary shares to Alibaba, the sale of $400 million of Alibaba ordinary shares to members of the Alibaba Partnership acting collectively and the sale of $500 million of Alibaba ordinary shares to a major sovereign wealth fund.

Softbank said the transactions will increase its liquidity cushion, improve its consolidated net interest-bearing debt/EBITDA ratio from 3.8x as of March 31, 2016 to approximately 3.3x, and promote flexible and prudent financial management.

The trust securities will allow Softbank to monetize its shares at a potential premium to the current share price while eliminating downside risks.

Proceeds will be used to repay debt and for general corporate purposes.

After the sale of the Alibaba shares, Softbank will hold 28% of the company.

Based in Hangzhou, China, Alibaba is an online and mobile commerce company in the People’s Republic of China and internationally.

© 2015 Prospect News.
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