Corporate finance: Largest tranche in the private credit market: Apollo provides Softbank mega-credit

Masayoshi Son, CEO of Softbank

In December alone, Softbank invested in numerous companies.

(Photo: AP)

Frankfurt. The credit market apart from the traditional banks is growing into new dimensions. The best example is a planned loan of around four billion dollars by Apollo Global Management to the Japanese Softbank Group. This would be the largest tranche to date in the so-called private credit market, which is mainly dominated by Anglo-Saxon funds.

The loan for Softbank will likely have a mid-single-digit interest rate, Bloomberg news agency reported, citing people familiar with the negotiations.

Apollo and its partner company Athene Holding are in charge of the deal; other investors include foundations and institutional addresses from the financial sector.

Masayoshi Son’s Softbank holding company is currently going through a difficult phase. Some senior managers have left the house and valuations of holdings – from Alibaba Group to Didi Global – have come under pressure.

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The global uncertainties due to the corona crisis and the political pressure on Internet companies in China have also caused problems. There are also political headwinds in the mega-deal of the planned sale of Arm Ltd to Nvidia.

Nonetheless, the Japanese Softbank Group’s hit rate remains high. In December alone, Softbank invested in companies such as Cerebral, the logistics start-up Nowports and Addi in South America. The portfolio companies Snapdeal in India and Chesity are public candidates, at the same time Softbank published a share buyback program for the equivalent of nine billion dollars. Softbank and Apollo representatives refused to comment on reports of the mega-loan.

The fastest growing asset class

The so-called private debt funds are among the fastest growing asset classes in recent years. Anglo-Saxon companies dominate the business. For example, according to an analysis by Preqin, the leading almost two dozen funds in North America raised around 27 billion dollars in the third quarter of 2021 alone and thus underpinned their dominance.

The loan to Softbank surpasses the largest ever loan of $ 2.6 billion to financial investor Thoma Bravo. The majority of this “private” loan financing is accounted for by takeover loans, but normal investment projects are also increasingly being co-financed. As a rule, these loans are more expensive than bank loans, but the conditions can be made more flexible.

Softbank’s Vision Fund 2 has invested over $ 27 billion in more than 150 companies, including wireless advertising specialist InMobi and AutoStore. As of September 30, the fund had capital commitments of $ 42 billion, with Softbank and its founder Son as key donors.

The first fund, which mainly sovereign wealth funds from the Gulf states and large corporations like Apple had filled with almost 100 billion dollars in capital, bought into 92 mega start-ups such as the mobility service Uber.

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