SoftBank Corp to raise $800 million from bond-type shares in Japan first

By Anton Bridge

(Reuters) -SoftBank Corp plans to raise 120 billion yen ($809 million) in Japan’s first public offering of a bond-type class of shares, it said in a regulatory filing on Monday.

The shares are designed to avoid diluting common shareholders’ stakes as they cannot be converted into common shares at a later date and do not confer voting rights.

They are expected to offer higher yields than corporate bonds at a lower risk than equity and are principally aimed at individual investors, bankers involved in the issuance said.

SoftBank (TYO:) Corp, the Japanese telecommunications arm of tech investment giant SoftBank Group, first proposed the issuance in May, but board approval only came on Monday.

The shares will be listed on the Tokyo Stock Exchange on Nov. 1, with pricing expected between Oct. 13 and 17.

Although classed as equity in accounting terms, the shares offer a set dividend and can be redeemed by SoftBank after a period of five years.

This benefits investors by lowering principal risk while limiting the impact on SoftBank’s return on equity and earnings per share.

SoftBank said the annual dividend would be between 2.5% and 3% – sitting between its equity dividend yield of roughly 5% and its corporate bonds, the highest paying of which has a coupon rate of 1.3%.

Bankers involved in the issuance say the hope is to attract individual investors – who in Japan are typically risk averse – seeking out higher returns amid rising interest rates, but without both the volatility and principal risk that comes with direct shareholdings.

As the shares will be publicly listed, they can be purchased through the tax-efficient Nippon Individual Savings Account (NISA), unlike corporate bonds.

The issuance dovetails with Japanese government policy, which has long sought to encourage the use of household savings for investment, as half of household financial assets lie in cash or bank deposits.

SoftBank says the proceeds will be used for growth investments in telecommunications, IT technologies and “next-generation social infrastructure”.

Depending on demand for the shares, the bankers said other companies may too issue such shares, but noted this requires amending a company’s articles of incorporation, so it may take time before a market for the shares develops.

($1 = 148.3700 yen)