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SoftBank Plans $3.7 Billion Bond Sale After Record Profit

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(Bloomberg) -- SoftBank Group Corp. is planning its second yen-denominated bond offering of 2021 after recently posting the biggest-ever quarterly profit by a Japanese company.

The technology conglomerate plans to issue 405 billion yen ($3.7 billion) of bonds, targeting mainly individual investors, according to a statement by the group on Wednesday. SoftBank reported net income of 1.93 trillion yen for the three months ended March 31, with essentially all of that coming from its investment in the newly public Coupang Inc.

Masayoshi Son’s technology investment giant has seen a sharp upturn in fortunes over the past twelve months, with SoftBank’s Vision Fund investment arm driving recent profits after being the source of its biggest loss a year ago. SoftBank has long tapped individual investors in Japan rather than institutions for most of its yen funding from the local bond market, taking advantage of its strong brand recognition.

Some SoftBank bonds can pay individual investors an interest rate of about 3% at a time when depositors in Japan earn next to nothing on deposits because of the Bank of Japan’s negative-interest rate policy. The average yield on investment-grade yen corporate debt is less than 0.4%, according to data compiled by Bloomberg.

The funds from the current offering will be used for the redemption of existing debt, according to SoftBank’s statement on Wednesday. The notes are expected to be rated BBB by Japan Credit Rating Agency Ltd. and price within a range of 2.45% to 3.05% in June, according to SoftBank.

The company plans to issue bonds that mature in 35 years but which are callable after five. The notes are hybrid securities and have characteristics similar to equity, such as an optional interest payment deferral provision and subordinated payment priority to senior debt.

As a result, SoftBank expects that the notes will be eligible to be treated as 50% equity from rating firms JCR and S&P Global Ratings, according to the company. The notes also include a step-up-interest provision so that the interest rate increases after five years.

The company priced 177 billion yen of notes in an institutional debt offering in January, which was its first bond sale in more than a year at the time.

(Updates with bond details and chart.)

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