IFR Asia – January 20, 2018

SoftBank mulls mega telco float

„ Equities IPO could be biggest in Japan in nearly two decades

BY FIONA LAU

Global equity capital markets

bankers are circling one of

the biggest Japanese listings

on record after conglomerate

SOFTBANK GROUP said it was

considering listing its local

telecoms business.

According to Japanese

business daily Nikkei, SOFTBANK

CORP , the group’s mobile phone

unit, plans to list in Tokyo and

overseas, possibly London, in

the second half of the year in a

deal that could raise as much as

¥2trn (US$18bn).

SoftBank Group said in a

statement that a listing of

its mobile phone subsidiary

was one option for its capital

strategy, but made clear that no

such decision had been made.

A listing will allow SoftBank

Group to accelerate its

transformation into one of the

world’s biggest tech investors

without further raising its

already high debt levels.

The possibility of spinning

off SoftBank Corp had been

discussed within the company

in the past few years, people

familiar with the situation told

IFR.

“There have been on and off

discussions for some years, but

these are getting more serious

lately. As far as we know, they

haven’t formally appointed

banks on the deal yet,” said one

of the people.

“For a deal of such size, we

believe they will have to hire

a combination of domestic

and international banks,” said

another person.

A ¥2trn IPO would be one

of Japan’s biggest, rivalling

NTT DoCoMo’s ¥2.1trn listing

in 1998. It could also be the

biggest IPO in Asia-Pacific this

year, challenging the potential

float of Chinese smartphone

maker Xiaomi, expected to be

valued at up to US$100bn.

LOGICAL MOVE

Market participants, generally,

reckon it is a logical move for

the company to spin off the

mobile unit.

“Investors always ask

for a valuation discount in

conglomerates as they don’t

have direct control over any

of its businesses. Spinning off

the telecoms business will help

SoftBank realise the value of its

investment business, which is a

core development for the group

in the past few years,” said a

fund manager.

Tight Samurai reward for BPCE

„ Bonds French bank shows growing support for pot system in bookbuilding

BY TAKAHIRO OKAMOTO

BPCE left nothing to chance in

its quest for tight pricing on

Japan’s first Samurai issue of

2018, a dual-tranche offering

of senior preferred and senior

non-preferred bonds.

The French bank raised a

total of ¥116.1bn (US$1.04bn),

comprising ¥52.9bn of

preferred notes and ¥63.2bn of

non-preferred paper – the latter

counting towards its total loss-

absorbing capacity.

A clever tranching strategy

and unusually narrow price

guidance, coupled with the

transparency of the pot

system during bookbuilding,

helped BPCE achieve far

tighter spreads than on recent

Samurais from the financial

sector.

It also showed growing

support among Japanese

investors for the pot system,

widely used in the global

markets.

“We have no doubt the

pot will spread as a trend,”

said Ryusuke Kurihara, debt

syndication head at Daiwa.

“Surely, we are going to

promote it [in international yen

deals] and quite a few issuers

will follow.”

BPCE sold a total of six

tranches at tenors ranging from

five to 15 years, but official

marketing was initially limited

to two – a five-year preferred

and 10-year non-preferred.

After two days of sounding

on January 11-12, BPCE began

marketing on Monday, with the

other tranches being offered on

a reverse-inquiry basis.

Guidance was very narrow

from the start. The preferred

tranches were offered at

4bp/5bp for five years, 10bp

area for seven and 15bp area

for 10 years – in contrast to

the traditionally wide ranges

preferred in the Samurai

market.

For the non-preferred

tranches, BPCE started the

five-year SNP at 22bp area, the

10-year at 40bp/42bp and the

15-year at 36bp area.

These levels were roughly

the maximum the issuer could

pay, given that its funding costs

in yen are more expensive after

swaps than in euros and dollars.

“The five-year senior

preferred and the 10-year

senior non-preferred were

official tranches from the

beginning, but, for the other

tranches, we decided to make

them official when we found

¥1bn of demand,” said a banker

on the deal.

As the guidance for the five-

year senior tranche already

looked quite expensive for the

borrower, that piece had a cap

of ¥60bn.

At final pricing, the SP

portion was split into ¥49.4bn

0.217% five-year, ¥1.2bn 0.329%

seven-year, and ¥2.3bn 0.484%

10-year notes. The SNP tranches

comprised ¥38.4bn 0.385% five-

year, ¥23.7bn 0.734% 10-year,

and ¥1.1bn 0.917% 15-year

notes.

TIGHTER SPREADS

Compared with prior

transactions from French

banks, spreads have tightened

remarkably – especially in the

SNP format.

When BPCE introduced the

first yen-denominated five-

year SNP bonds a year ago,

they were priced at 50bp over.

Societe Generale in May and

Credit Agricole in June issued at

30bp over. From the UK, Lloyds’

News

“The five-year senior preferred and the 10-year

senior non-preferred were official tranches from

the beginning, but, for the other tranches, we

decided to make them official when we found

¥1bn of demand.”

“Spinning off the

telecoms business

will help SoftBank

realise the value of its

investment business.”