Softbank Has More Debt Than Venezuela

Arm’s owner, Softbank, has more debt than Venezuela – $147 billion for Softbank, $140 billion for Venezuela.

Softbank has been able to raise all this debt by offering its holding in Alibaba as collateral. The holding is worth $130 billion.

However the holding is not in readily realisable shares or bonds – it is in the form of securities which apparently need Alibaba’s permission to be sold.

There are signs Alibaba is unwilling to give this permission – previous part-disposals of this holding have been accomplished by tortuously complex transactions suggesting that they are not readily liquidated.

There are also signs that Softbank’s creditors are getting impatient, which may explain why Softbank is proposing to give up control of Sprint, IPO its Japanese telco and, possibly, re-list Arm.

Under the terms of some of the Japanese telco’s bonds, Softbank can’t IPO the telco while the telco’s bonds are rated as junk, which they currently are, so Softbank is issuing new bonds to buy these old bonds. 

To sell the new bonds, Softbank has to offer generous terms which will reduce the value of the old bonds, making  a lot of creditors unhappy and unhappy creditors can become vengeful creditors.

Arm, of course, now it is loss-making, may turn out to be worth less than the $32 billion which Softbank paid for it two years ago.

This has all the makings of a mess.

Besides the wretched bondholders, the main victim will, sadly, be Arm –  a fine company betrayed by its top management, the City and the government.


Comments

4 comments

  1. I agree, DontAgree, ARM is imploding right on cue for RISC-V. It’s still awful to see something painstakingly built up over 25 years by thousands of dedicated people thrown to the dogs to enrich a greedy few.

  2. The RISC V proponents are probably enjoying this …

  3. Well post-2008, AnotherDavid, governments were shovelling out cash to the banks and the banks were looking for anyone who was prepared to take the cash from them, and Softbank appeared to have this Alibaba collateral while Masa had more ambition than business nous and so, for him, expanding his empire with debt, was a way to demonstrate progress.

  4. But we are open for business as the good lady said.
    How can this sort of thing happen, I guess the banks makes loads of dosh out of every transaction.

Leave a Reply

Your email address will not be published. Required fields are marked *

*