SoftBank Explores Plans to Grab a Slice of Private Credit Market

Silas Brown and Katharine Hidalgo, Bloomberg News

Pedestrians wearing protective masks walk past a SoftBank Corp. store in Tokyo, Japan, on Friday, Aug. 7, 2020. After reporting record losses in May and warning the coronavirus outbreak could be as devastating as the Great Depression, SoftBank Group founder Masayoshi Son is already poised to declare a recovery. , Bloomberg

(Bloomberg) -- SoftBank Group Corp. is working on plans to become a lender in the $1.5 trillion world of private credit.

Senior investors at the Japanese firm have spoken to market participants about directly lending to technology firms, and touted the possibility of deploying as much as $1 billion via SoftBank Investment Advisers, according to people with knowledge of the matter.

The discussions are at an early stage and may still change, said the people, who asked not to be identified because they’re not authorized to speak publicly. A spokesperson for SoftBank declined to comment.

The news comes as Abu Dhabi sovereign wealth fund Mubadala Investment Co. and Fortress Investment Group’s management team announced that they had agreed to buy 90% of the equity held by Japanese conglomerate SoftBank Group Corp. in the US asset manager.

Read more: SoftBank Sells Fortress Stake to Mubadala, Management Team (1)

Tech Deals

The fact that SoftBank, one of the world’s most aggressive tech investors, is looking at private credit is more evidence of the market’s rapid growth. Multi-billion dollar debt deals for firms such as Zendesk Inc. and Coupa Software have been funded by direct lending in the past year.

Deep-pocketed investors are finding opportunities providing debt to tech firms, especially as large software companies stay private for longer. There’s also a hole in the market left by Silicon Valley Bank, which had been a major provider of debt funding to startups before its collapse.

SoftBank is targeting low double-digit yields for the strategy, the people said, which is roughly the same as what most direct lending funds expect to earn.

--With assistance from Abhinav Ramnarayan and Lisa Lee.

(Adds line in third paragraph about Mubadala and Fortress)