By Rebecca Melvin
New York, June 2 – Softbank Group Corp. priced an upsized $5.5 billion of mandatory securities exchangeable into Alibaba Group Holding Ltd. stock after the market close on Wednesday at par of $100.00. The new paper yields 5.75% with an initial exchange premium of 17.5%, according to a syndicate source.
The Rule 144A deal was initially talked at $5 billion in size. There is a greenshoe for up to an additional $1.1 billion of mandatories, which was upsized from $1 billion.
Pricing came at the cheap end of talked terms, which was for a 5.25% to 5.75% dividend and 17.5% to 22.5% premium.
The mandatory exchangeables were 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 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.
Morgan Stanley & Co. LLC and Deutsche Bank Securities Inc. were joint bookrunners of the deal.
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 to 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.
| Issuer: | Softbank Group Corp.
|
| Exchange entity: | Alibaba Group Holdings Ltd.
|
| Issue: | Mandatory exchangeables
|
| Amount: | $5.5 billion, upsized from $5 billion
|
| Greenshoe: | $1.1 billion, upsized from $1 billion
|
| Maturity: | June 1, 2019
|
| Bookrunners: | Morgan Stanley & Co. LLC, Deutsche Bank Securities Inc.
|
| Coupon: | 5.75%
|
| Price: | Par, $100.00
|
| Yield: | 5.75%
|
| Exchange premium: | 17.5%
|
| Initial threshold price: | $90.11
|
| Minimum exchange rate: | 1.1097 shares
|
| Maximum exchange rate: 1.3040 shares
|
| Call: | Non-callable
|
| Net share settlement: | Yes
|
| Takeover protection: | Yes
|
| Price talk: | 5.25%-5.75%, up 17.5%-22.5%
|
| Pricing date: | June 1
|
| Share reference symbol: | Nasdaq: ADS: BABA
|
| Share reference price: | $76.69, at close June 1
|
| Distribution: | Rule 144A
|
| Market capitalization: | $192.7 billion
|
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