Japan: A bridge too far?
The bridge loan Softbank has taken out to acquire Vodafone in Japan is enormous, negotiated on onerous terms and costly by Japanese standards.
By Chris Wright
|Vodafone’s Sarin: chose Softbank’s bid of $15 billion because it required no further scrutiny of assets|
M&A has never looked like this before, particularly in Japan. Softbank’s leveraged buyout of Vodafone KK, the Japanese operations of the Vodafone group, is a landmark for a host of reasons, not all of them all that encouraging. For a start, there’s the sheer scale of the deal. The ¥1.8 trillion ($15.3 billion) purchase price is funded in the main through a ¥1.28 trillion loan, quadrupling the previous record of ¥224 billion secured by Ripplewood Holdings when it bought Japan Telecom in 2003.
Then there’s the fact that the entire funding requirement is structured as a one-year bridge loan; this is highly unusual, particularly for a deal of such size, where more typically the funding would be divided between a bridge, a syndicated loan and other structures. On top of that, there’s the extraordinary agreement that was in place on break fees. Instead of the norm – where the seller commits a break fee to the buyer – in this case Softbank pledged to pay Vodafone a whopping ¥60 billion (Vodafone calls it “liquidated damages”) if it couldn’t go through with the deal.