SoftBank Group, the Japanese technology giant, used its stake in online retailer Alibaba Group as collateral for an $8 billion loan from a group of banks in what is one of the biggest deals of its kind, according to people familiar with the matter. Morgan Stanley, Citigroup, Goldman Sachs, Bank of America and J.P. Morgan were among at least 10 banks that helped to make the so-called margin loan, which is guaranteed only by Softbank’s Alibaba holding, said the people, who requested anonymity as the details aren’t public. The deal won’t be reflected in the Tokyo-based company’s debt, which may help shield it from a ratings downgrade, and could help its plans to sell shares in a domestic subsidiary, the people said.
BNP Paribas, Deutsche Bank, Nomura Holdings, Societe Generale, UBS Group and ING Groep were among other lenders on the deal, the people said. “To my knowledge, I would agree that $8 billion is the largest margin loan ever,” said Bethany Knight, a former Deutsche Bank executive who now advises on equity derivatives at Riverside Risk Advisors LLC in New York. “There are only a handful of sizable margin loans due to the significant ownership stake needed in a large, liquid, public company.”
The margin loan’s interest rate is the London interbank offered rate, or Libor, plus about 150 basis points, or 1.5 percent, two of the people said. Softbank sold $2 billion of 10-year bonds last year that had a yield of 5.7 percent in London. The margin loan may also remove an obstacle to the initial public offering of Softbank’s domestic telecommunications unit, which had been used as collateral for its earlier debt, one of the people said. A successful IPO — possible only after the division proves its independence by canceling debt guarantees — could help the parent raise capital and relieve some of its debt burden, which reached 15.8 trillion yen ($147 billion) at the end of last year. A Tokyo listing could raise more than 2 trillion yen, people with knowledge of the matter said this year.