The loan would be secured by SoftBank’s second Vision Fund, people familiar with the matter said. This roughly $ 40 billion pot includes stakes in 150 companies such as Indian e-commerce giant Flipkart; the digital banking start-up Revolut; and Cameo, a site where celebrities sell personalized messages. SoftBank can use the money for a variety of purposes, one of the people said.
The deal between the investment giants shows SoftBank’s voracious need for liquidity and highlights Apollo’s push into lending, territory traditionally dominated by banks.
Using borrowed money to make investments, rather than one’s own money, would increase SoftBank’s profits if these bets turn out to be successful and exaggerate the losses if they go wrong.
SoftBank, whose holdings range from Japanese telecommunications to European chipmakers and Silicon Valley startups, has already drawn on its various holdings to borrow. Last spring, it arranged an $ 8 billion loan from a group of banks secured by its stake in Chinese e-commerce giant Alibaba Group Holding. Ltd.
The original Vision Fund, launched in 2016 with around $ 100 billion, was the largest ever pool for private investment. SoftBank spent it at a steady pace, on everything from rideshare apps including Uber Technologies Inc.
to indoor agriculture startups and artificial intelligence companies. He bet big on WeWork Inc., the co-working company that collapsed before its eventual listing.
The fund has relied heavily on leverage, with $ 40 billion of its capital in the form of preferred shares bearing a 7% interest rate held by the Abu Dhabi sovereign wealth fund Mubadala Investment Co. and the Saudi Arabia Public Investment Fund. The preferred stock had the effect of amplifying the gains and exacerbating the losses.
The follow-up fund was expected to be even bigger, but outside investors stayed on the sidelines, disappointed with bad bets such as WeWork and the chaotic way the Vision Fund had operated. Instead, SoftBank has had to rely on its own cash to make investments, but that hasn’t stopped the fund from investing at a breakneck pace that shows no signs of easing.
This money was less abundant. In November, SoftBank reported a quarterly loss of $ 3.5 billion, affected by China’s crackdown on tech companies. Its participation in the Chinese carpooling company Didi Global Inc.,
for which he paid $ 12 billion, was valued at $ 7.5 billion. The stake in Alibaba, its largest stake, has halved over the past year. In total, SoftBank’s asset value fell $ 54 billion from the previous quarter.
“We are in the middle of a snowstorm,” SoftBank chief executive Masayoshi Son told reporters.
In another setback, the United States Federal Trade Commission sued this month to block Nvidia Body
plans to buy out SoftBank-owned semiconductor design specialist Arm Holdings, arguing the deal is anti-competitive.
SoftBank has pledged to spend at least $ 9 billion to buy back its own shares, which have lost about half of their value since February. The buyback comes on top of a $ 20 billion share buyback program that was completed earlier this year.
At the end of September, SoftBank valued the second Vision Fund at $ 38 billion. Several of his holdings recently became public, including Chinese grocery start-up Dingdong. Ltd.
and robotics company AutoStore Holdings Ltd.
Apollo and its insurance subsidiary, Athene Holding Ltd.
, plans to lead the SoftBank loan, which would carry an average single-digit interest rate, joined by an investor group including mutual funds, foundations and financial institutions, one of the people said.
Growing large loans is of increasing interest to asset managers and private equity firms. Last year Apollo led a $ 4 billion bankruptcy loan for Hertz Global Holdings Inc.
in partnership with Athens. In October, executives said Apollo was on track to grant 30 loans of over $ 1 billion this year, up from one in 2019.
Apollo and some of his peers are often able to underwrite complex transactions that a bank wouldn’t touch because they don’t fit neatly into an established category. While most private equity funds use leverage to close deals, SoftBank’s Vision Fund invests in early stage companies that typically do not generate cash flow to support debt.
Apollo, which plans to strike a deal in January to buy the part of Athene it does not yet own, needs a steady supply of new debt deals in which to invest the insurer’s assets.
On Monday, Athene announced that she would buy a company that finances clean energy projects in commercial properties, the latest in a series of similar deals for lending companies that she has entered into this year. This summer, Apollo was the second bidder for GreenSky LLC, a home improvement and healthcare lender that is sold to the Goldman Sachs group. Inc.,
said people familiar with the matter.
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