Japanese communications giant Softbank last week completed the world's largest whole business securitization (ASR, 10/02/06). The 1.45 trillion ($12.46 billion) deal refinanced short-term bridge loans used in Softbank's April acquisition of Vodafone KK (subsequently renamed Softbank Mobile), the Japanese mobile phone subsidiary of the U.K.'s Vodafone Group.
Citigroup Global Markets, Deutsche Securities and Mizuho Corporate Bank, with 12 other banks joining them in the syndicate, structured the transaction. The deal comprises a mix of secured bonds and loans backed by the assets and residual income earned by Softbank Mobile.
Softbank's motivation for the deal was largely economic. The interest on the bridge loans had already risen from an initial 250 basis points over Tibor to 300 points in October, and was due to step up to 350 basis points from the start of 2007.
Softbank's stand-alone rating from Moody's Investors Service and Standard & Poor's is only Ba2'/BB-'. Consequently, the whole business solution offered it the chance to achieve higher ratings and, as a result, tighter pricing than straight bonds, with the added bonus of stretching its yield curve out to 13 years.
Moody's and S&P rated the 1.15 trillion of senior 10-year debt on the securitization A3'/A' respectively, while the 300 billion of 13-year subordinated debt was rated Baa3'/BBB'.
The company declined to offer details on pricing, saying in a statement the deal resulted "in a reduction in financing cost compared with other loans."
However, market whispers indicate the senior debt was offered in the 100- to 150 basis-point range, with the subordinate tranches marketed at around 250 points over Tibor.
Distribution details are being kept private by the individual syndicate banks, although it has been widely reported the sales effort was challenging. Goldman Sachs opted out of the syndicate at a late stage, while analyst concerns at Vodafone Mobile's ability to generate stable cash flows in an overcrowded market can also not have helped matters.
Despite this, a number of other companies - mainly low rated or unrated corporates with a proven track record of stable cash flows - are thought likely to follow Softbank's lead in 2007. These include healthcare providers, pachinko parlor operators (Japanese pinball), utilities firms, golf driving ranges and leisure hotel businesses.
Macquarie completes debut
Elsewhere, Australia's Macquarie Countrywide - the listed property trust established by Macquarie Bank - last week completed its debut A$450 million ($353.8 million) commercial mortgage-backed deal. National Australia Bank and Macquarie were joint leads on the deal, secured more than 52 supermarkets and shopping centers located throughout Australia.
All five tranches, which carried a scheduled maturity of three years and legal final of 4.5-years, priced in the middle of their indicative range.
The A$330 million senior notes - rated triple-A by S&P - finished 19 basis points over the Bank Bills Swap Rate (BBSW), while the A$50 million of double-A notes offered a 23 point pickup.
In addition, the A$25 million single-A piece priced at 27 points, the A$30 million triple-B piece at 47 points and the A$15 million of triple-B minus notes paid 57 points over BBSW.
Staying in Australia, Westpac Office Trust (WOT) last week launched its own A$505 million issue via the WOT CMBS vehicle. Westpac Institutional Bank is sole lead on the offering, secured by first registered mortgages held over two commercial office buildings located in Sydney, New South Wales.
The buildings, independently valued at a combined A$1 billion, boast almost 100% occupancy with an average lease expiry of 12.4-years. The debt service coverage ratio for the senior notes is 1.97 times.
WOT will sell four tranches with a scheduled maturity of 4.9-years and legal maturity of 6.5-years. The A$320 million senior piece is rated triple-A by S&P, while the deal also includes A$45 million of double-A notes, an A$90 million single-A tranche and A$50 million of triple-B paper. Pricing is expected this week.
Asian CLO
Clearwater Capital Partners, the private equity firm specializing in managing distressed and restructured debt in ex-Japan Asia, last week launched its first CLO. Merrill Lynch is arranger on the $146 million offering, issued via a Singapore-domiciled special purpose vehicle.
The transaction is backed by 28 distressed corporate loans representing 77.4% of the pool and six high yield bonds extended to 24 corporates. Aside from two obligors in Mexico and Bahrain, the credits are predominantly Asian names. Malaysia, Indonesia and the Philippine corporates represent 73.3% of the portfolio. Around 53.6% of the credits are from the mining, agriculture and telecoms sectors.
All the loans and bonds are U.S. dollar denominated. According to Moody's, the weighted average credit rating of the obligors is B3'.
The seven-tranche deal reaches legal maturity in February 2004. Support for the $40.9 million senior notes - rated triple-A by Moody's - comes mainly through subordination and a reserve account.
The deal also features five other publicly offered tranches with ratings ranging from Aa2' to B3'. Clearwater will retain the $59.9 million unrated equity tranche.
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