SoftBank is finalizing up to $10bn in loans from banks ahead of the planned Arm Ltd.’s IPO where the latter’s valuation is eyed at $50-60bn. The loans will be secured against Arm Ltd. and were a pre-condition set by SoftBank for banks to participate in the IPO. The loans carry a term of up to two years and could be repaid either in cash or in Arm stock. SoftBank’s loan-to-value ratio had risen to 22% as of end-December 2021; the company expects to keep it under 25%. Using its shareholding as collateral, SoftBank Group can reduce its LTV and still can secure new funds. Proceeds from the loan are expected to be used for new investments.
The news comes days after SoftBank received $1.1bn in additional loans from Apollo Global Asset Management. Bankers say that SoftBank’s high expectations of Arm Ltd.’s valuation is very ambitious given current market conditions. Mizuho Financial Group, Goldman Sachs, and JPMorgan Chase are expected to have leading roles in the IPO, sources said. The loans come at a time when SoftBank’s China tech companies’ holdings have witnessed a plunge in value after regulatory crackdowns from Beijing, putting its balance sheet under some pressure. Recently, key figures have also departed from SoftBank’s vision fund. Besides, a control dispute regarding Arm Ltd’s China business remains unresolved.
SoftBank’s dollar bonds were higher – its 4.625% 2028 were up 0.17 points to 88.72 and yielding 6.87%.
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