Apollo to lend $4 billion to SoftBank in 'biggest' private credit deal

By Paula Seligson and Gillian Tan

Apollo Global Management Inc. is planning to lend about $4 billion to SoftBank Group Corp., marking the biggest ever loan of its kind in the private credit market, according to people with knowledge of the matter.

The financing will be backed by holdings of SoftBank Vision Fund 2, which has made a range of equity investments in technology startups, the people added, asking not to be named discussing a private transaction. Terms are not yet final, but the $4 billion in borrowings would compare to the fund’s holdings of about $40 billion, one of the people said.

The interest rate on the loan is expected to be in the mid-single-digit percent range, the people added. Apollo, along with its insurance affiliate Athene Holding Ltd., are leading the deal, and a group of additional investors including mutual funds, endowments and financial institutions will also be part of the transaction, they said.

The loan comes during a period of relative turmoil at Masayoshi Son’s investment powerhouse, which is grappling with a spate of high-profile departures as well as a cratering of value in holdings from Alibaba Group Holding Ltd. to Didi Global Inc. Global macroeconomic uncertainty and China’s crackdown on its biggest internet firms spurred a record loss at its Vision Fund unit during the September quarter. Its sale of Arm Ltd. to Nvidia Corp. is also in jeopardy, threatening a potential windfall of roughly $74 billion.

Still, the Japanese giant continues to sustain a rapid pace of deal-making. This month alone, SoftBank invested in Cerebral Inc., logistics startup Nowports and Latin America’s Addi, among others. Portfolio companies including India’s Snapdeal and Cohesity filed for initial public offerings or are in discussions for one. And SoftBank unveiled a 1 trillion yen ($9 billion) share buyback program just last month.

Representatives from SoftBank and Apollo declined to comment. The Wall Street Journal first reported the transaction.

The Apollo loan is a unitranche financing, meaning it blends first-priority and second-priority loans into a single facility. At $4 billion, it marks the biggest such deal on record, according to data compiled by Bloomberg.

It surpasses a $2.6 billion private loan that helped finance private equity firm Thoma Bravo’s buyout of Stamps.com, and another $2.6 billion unitranche that was part of a broader $3.4 billion debt financing provided to Galway Insurance to fund in part its takeover of MAI Capital Management. These types of large financings are becoming an increasingly common alternative to syndicated loans for funding leveraged buyouts.

SoftBank Vision Fund 2 has invested over $27 billion across more than 150 companies including InMobi, a mobile phone advertising company, and AutoStore, a robotic warehouse storage company, as of Sept. 30, according to a presentation. Some of Vision Fund 2’s portfolio companies such as as JD Logistics Inc. are public, while others, like eToro, have struck deals to become public, creating liquidity.

The vehicle had $42 billion in committed capital as of September 30, the presentation shows. Vision Fund 2 counts SoftBank and its billionaire founder and chairman Son as key investors.

SoftBank’s first Vision Fund also borrowed against its holdings. The vehicle leaned on a roster of banks for margin loans on its South Korean e-commerce giant Coupang Inc., and food-delivery service DoorDash Inc. to help fund distributions to investors, including sovereign wealth funds from Saudi Arabia and Abu Dhabi, Bloomberg News reported in October. In 2019, the first Vision Fund separately borrowed roughly $4 billion by pledging stakes in two companies including Uber Technologies Inc.