Banks in Wall Street are just not the only enablers for SoftBank as the company tries to build an investment empire. The Japanese Mega Corporation is also borrowing large sums of money from a source that is closer to home, namely Mrs. Watanabe.
The Japanese investment giant made headlines last month when it issued the biggest yen-denominated corporate bond, a ¥500bn, which is around $4.5 billion is US dollars, in a deal that is exclusively targeting individual investors who are seeking to receive decent returns against a backdrop of record-low interest rates in the country.
The deal was no one-off situation either. SoftBank has also become the whale of the retail bond market in Japan, and now the Japanese conglomerate is solely responsible for more than half of all corporate and financial debt issuance in the country.
The Mega Banks in Japan are the ones who used to dominate this market before. SoftBank, which despite the name is not an actual financial institution, is now dwarfing these huge banks in Japan with nearly four times as much retail debt outstanding than the biggest lender in Japan, which is the Mitsubishi UFJ Financial Group.
It is not very hard to observe why SoftBank’s massive debt is so attractive to Mrs. Watanabe, which is the catch-all term for Japan’s army of retail investors. While the typical corporate retail bond only yield about 0.25 per cent, SoftBank’s recent offering came with a huge 1.64 per cent coupon. On top of that deal, buyers will receive gifts, and some of them are connected to the baseball team that SoftBank owns.
While SoftBank Group’s ¥15.7tn of interest-bearing debt and ¥27tn of total liabilities may mean that western credit rating agencies will class this as junk bonds on the grounds of its low cash flows and high debt, SoftBank currently enjoys an investment-grade rating from the local agency, JCR.
The retail bond market in Japan has traditionally been very small, which is relative to household savings. Yet, SoftBank estimates that as much as 650,000 retail investors now hold its bonds in Japan. That is a lot of Mrs. Watanabes that are backing the billionaire investor Masayoshi Son’s gigantic bets on the tech industry of the world.