Deals Fuel Japanese Lenders -- WSJ
20 Luglio 2016 - 9:03AM
Dow Jones News
Mizuho's bridge loan to SoftBank highlights a move toward
overseas financing
By Atsuko Fukase
TOKYO -- Internet and telecommunications giant SoftBank Group
Corp.'s $32 billion buyout of U.K.-based ARM Holdings PLC is good
news for Mizuho Bank, underscoring how Japanese lenders see
financing cross-border deals as a growth area.
Mizuho, the core banking unit of Mizuho Financial Group Inc.,
will provide a bridge loan of about Yen1 trillion, or roughly $10
billion, to back SoftBank's bet on ARM, a chip designer, SoftBank
said Monday when announcing the buyout.
Corporate Japan's appetite for domestic loans remains weak,
despite the Bank of Japan's efforts over the past three years to
increase demand by lowering interest rates through its
extraordinary monetary policies. The BOJ's introduction early this
year of a negative interest rate on some bank reserves has driven
yields on government debt to record lows, and some into negative
territory, while pressuring banks' profits.
In search of opportunity, many Japanese lenders have turned to
financing mergers and acquisitions, mainly of Japanese companies
seeking to buy growth abroad.
Before SoftBank's acquisition of ARM, Japan's outbound deal
volume had lagged behind so far this year, dropping more than 60%
from a record level during the same period last year, according to
data provider Dealogic. SoftBank's deal for ARM raised outbound
M&A to $51.7 billion year-to-date, slightly behind last year's
record $54.9 billion, according to Dealogic.
Mizuho, SoftBank's main lender, will likely end up sharing the
financing on the deal with other banks such as Bank of
Tokyo-Mitsubishi UFJ and Sumitomo Mitsui Banking Corp. in the next
few months, according to a person familiar with the matter.
SoftBank said in a statement that all or part of the bridge loan
would be refinanced with longer terms.
Japanese companies are expected to continue seeking growth
abroad through acquisitions, given Japan's sluggish economy and
shrinking population. Analysts caution that Japanese lenders, faced
with a low-rate environment at home, may take on excessive risk in
seeking to finance deals overseas.
Nana Otsuki, an analyst at Monex Securities, noted that
SoftBank's debt carries a junk rating from Moody's and Standard
& Poor's. "Mizuho may be taking too much risk" by providing
Yen1 trillion as the sole lender to a company with a junk status,
Ms. Otsuki said.
An acquisition the size of the SoftBank-ARM deal often prompts
ratings companies to review their ratings of corporate debt.
S&P declined to comment on whether it would review SoftBank's
rating. Moody's couldn't immediately be reached for comment.
Asked whether the bank was taking on too much risk, a Mizuho
spokeswoman said the lender recognized the strategic significance
of the deal for SoftBank and wanted to support its client.
Write to Atsuko Fukase at atsuko.fukase@wsj.com
(END) Dow Jones Newswires
July 20, 2016 02:48 ET (06:48 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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