Japanese conglomerate SoftBank is turning to a group of investors led by private equity giant Apollo Global Management for a $4bn loan as it scrambles to recover its cash on hand after a series of portfolio setbacks.
A group including Apollo, SoftBank’s insurance affiliate Athene Holding, and other investors including financial institutions, mutual funds and endowments, will provide the loan to the group’s beleaguered $40bn tech-focused Vision Fund 2 by the end of the year.
As part of the loan arrangement, the Japanese investment giant will pledge some of its stakes in its portfolio tech companies, a source familiar with the matter told the Wall Street Journal, who first reported the news.
At the same time, it marks a significant push into direct lending on Apollo’s behalf, after it launched a $12bn platform to move into the area historically reserved for banks last year.
It’s cash that SoftBank evidently needs, after its profit – particularly that of its tech-focused Vision Fund and Vision Fund II – suffered in the past few months.
The conglomerate has been investing making new investments at a rapid rate, but at the same time, its gains from various IPOs in recent months have been dragged down by falling valuations after Beijing’s regulatory crackdowns.
Adding insult to injury, earlier this month SoftBanks suffered a shares slump after three of its high-profile investments Didi, Arm and Grab were hit with setbacks in 24 hours.
Since listing at the beginning of the month, its portfolio company Grab has seen its share price plummet by 44 per cent.
In November, the group reported a second quarter loss after its Vision Fund unit took a $10bn hit from a decline in the share price of its portfolio companies.
After caving into investor pressure and announcing a $9bn share buyback – a go-to strategy for the group – alongside its results, Softbank founder Masayoshi Son was less optimistic than usual.
“What happened to us? We are in the middle of a blizzard,” Son said at an investor presentation following the company’s results.
“The SoftBank Vision Fund performance is not something I’m proud of.”