SoftBank sells bonds at lowest underwriting fees in 10yrs

SoftBank Group Corp. achieved a significant milestone by reducing underwriting fees for yen retail bonds, marking the first time in a decade. This move reflects the market’s growing confidence in SoftBank’s improving credit quality.

The firm paid brokerages ¥1.10 per ¥100 to underwrite ¥550 billion ($3.5 billion) worth of seven-year notes for individual investors. This represents a decrease from the ¥1.25 rate the company paid since 2014, including its March 2024 issuance.

In April, Japan Credit Rating Agency Ltd. raised the firm’s debt score from A- to A, marking its first upgrade in over a decade. Similarly, S&P Global Ratings elevated SoftBank’s rating to BB+ from BB in May, although it remains one step below investment grade.

Despite this progress, SoftBank’s underwriting fees still exceed those for other retail bonds sold this year, averaging more than double the industry standard, as per Bloomberg’s data.

Toshiyasu Ohashi, a senior managing director at Daiwa Institute of Research, notes that fees decrease as creditworthiness improves, adding that lower credit risk reduces underwriting risk for brokerages and lowers costs of selling debt to investors.

The overall rise in creditworthiness of Japanese companies, with JCR reporting 99 upgrades in 2023 compared to 50 in 2021, could lead to a decline in issuance costs for companies. This would incentivize them to raise funds through corporate bonds.

SoftBank has been a major player in the Japanese corporate bond market, issuing a significant ¥1.2 trillion so far in 2024, exceeding the amount raised in the entirety of 2023 by more than five times.

The company has also utilised margin loans secured by its assets and capitalised on IPOs of its portfolio companies, like Arm Holdings Plc. These activities have solidified SoftBank’s position as a top client for Japanese investment banks.

Attribution: Bloomberg