Press Releases 2006

Resolution made at the board of directors meeting regarding refinancing of mobile communications business

Nov. 17, 2006

SOFTBANK CORP. (“SOFTBANK”) announces that for refinancing with a purpose to extend the term of borrowings based on the bridge facility totaled to JPY1.28 trillion for the acquisition of Vodafone K.K. (current SOFTBANK MOBILE Corp., head office: Minato-ku, Tokyo; Representative: Masayoshi Son; “SBM”) concluded in April 2006, the proposal of the various transactions to be carried out by Mobiletech Corporation (head office: Minato-ku, Tokyo; Representative: Junichi Miyakawa; “Mobiletech”), SOFTBANK’s wholly-owned subsidiary, BB Mobile Corp. (head office: Minato-ku Tokyo; Representative: Masayoshi Son; “BBM”) and SBM (including its wholly-owned subsidiaries) was approved at the board of directors meeting held today.

I Summary of the main transactions for approval

  • 1 Borrowings by SBM totaled to JPY1.45 trillion*1
  • 2 Repayment of the borrowings (JPY1,173.8 billion) based on Bridge Facility Agreement contracted by BBM (totaled to JPY1.28 trillion)
  • 3 Modification of the terms of class 1 preferred stock already issued by BBM
  • 4 Determination of terms of class 2 preferred stock to be issued by BBM (classified stocks with veto rights)
  • 5 Establishment of security interests over the assets of Mobiletech, BBM, SBM and SBM’s wholly-owned subsidiaries (4 companies in total)
  • 6 Trust debt assumption regarding SBM issued straight bonds totaled to JPY100 billion
  • 7 SBM assumption of the debt liability on a non-recourse basis of JPY82.5 billion regarding BBM subordinated loan of JPY100 billion
[Note]
  • *1Includes transaction cost relating to refinancing.

II Summary of each transaction

The summary of each transaction is as stated as below. Refer to the attachment for the scheme of this matter. This refinancing adopts a whole business securitization (WBS*2) scheme to raise funds. Adoption of the scheme enables a higher certainty of repayment of the funds based on cash flow generated from the mobile communications business. It results in a higher rating that reduces funding cost compared to that of a normal borrowing.

1 Borrowings by SBM totaled to JPY1.45 trillion

Mizuho Trust & Banking Co., Ltd. (“the lender”), the Tokutei Kingai Trust Trustee that is entrusted the proceeds by WBS Funding*3 will lend loans to SBM (“SBM Loan”). The key terms and conditions of SBM Loan are as stated as below.

Borrower SOFTBANK MOBILE Corp.
Lender Mizuho Trust & Banking Co., Ltd. as the Tokutei Kingai Trust Trustee
Total amount of borrowings JPY1.45 trillion
of which,
Tranche1
JPY1.15 trillion
Tranche2
JPY125 billion
Tranche3
JPY175 billion
But the amount to be received at SBM side is planned to be the amount after withdrawing transaction cost and relative other costs.
Longest maturity
Tranche1
10 years
Tranche2
13 years
Tranche3
13 years
Interest rate To be determined (planned to be disclosed on the loan execution day)
Financial and operational target Financial target includes the amount of reduction in cumulative debt and EBITDA, and operational target includes number of subscribers. As long as the financial target and the operational target are achieved, a certain flexibility of business operation is allowed such as new service launch, capital investment and others.
Key covenants Range of CAPEX amount, scope of operation, restriction on sale and disposal of key assets and others.
Collateral Assets owned by Mobiletech, BBM, SBM and the SBM’s wholly-owned subsidiaries (4 companies in total)
Loan execution date 30 November 2006 (planned)

2 Repayment of the borrowings (JPY1,173.8 billion) based on Bridge Facility Agreement contracted by BBM (totaled to JPY1.28 trillion)

BBM will raise funds from SBM (“BBM Loan”) and will repay JPY1,173.8 billion on 30 November 2006 (planned) that was financed by 17 financial institutions based on Bridge Facility Agreement on 27 April 2006.

3 Modification of the terms of class 1 preferred stock already issued by BBM

The terms on dividend, redemption, and others of the class 1 preferred stock issued to Vodafone International Holdings B.V. (“Vodafone”) and Yahoo Japan Corporation will be amended. The relative shares will be redeemed after SBM Loan is fully repaid.

4 Determination of terms of class 2 preferred stock to be issued by BBM (classified stocks with veto rights)

(1) Purpose of issuance

In WBS scheme, lenders*4 assume only future cash flow to be generated from SBM mobile communications operation as a repayment source to the loans. Therefore, the most important issue for the lenders is establishing and securing a mechanism which allows SBM’s stable and sustainable mobile communications operation.

The issuance of class 2 preferred stock (classified stocks with veto rights) is an arrangement to realize a deterrence to eliminate arbitrary actions by BBM, SBM’s parent company, at the level of the board of directors as well as at the level of shareholders meeting that was requested by the lenders as a part of establishment and securement of a mechanism to materialize stable and sustainable mobile communications operation by SBM.

(2) Planned allottee

As a part of WBS scheme, BBM plans to issue 1 share of classified shares with veto right to Mizuho Trust and Banking Co., Ltd., as the Tokutei Kingai Trust Trustee. Also, all the shares (including classified shares with veto right) issued by BBM includes restriction of transfer.

(3) Rights

  • 1) Shareholder will be provided with rights to select and dismiss one independent director of BBM as long as WBS loan remains in lender side.

  • 2) Shareholders with classified shares with veto right will be provided with veto rights on following items as long as WBS loan remains in lender side;

    • (i) Additional funding
    • (ii) Start of new business
    • (iii) Any change to the Articles of Incorporation on allowance which was made at the time of introduction of WBS structure
    • (iv) Issue of shares, share acquisition rights, or other rights allowing the acquisition of shares (including securities convertible to shares)
    • (v) Filing of a petition for dissolution
    • (vi) Filing of a petition for bankrupcy
  • 3) Classified shares with veto right will be issued due to lenders’ request, therefore it will be structured for redemption after BBM buy back based on acquisition terms when WBS loan repayment completes.

Above-mentioned this time classified shares with veto right is only issued to provide necessary scope of right for the purpose of protection from unscheduled arbitrary or improper execution of shareholder’s right by BBM with the object of stable continuity of SBM business under WBS structure, and this is not for protection of SOFTBANK shares’ acquisition.

5 Establishment of security interests over the assets of Mobiletech, BBM, SBM and SBM’s wholly-owned subsidiaries (4 companies in total)

Under WBS structure, to execute SBM Loan, mortgage, securities, and security assignments will be established over all the assets (real property, movable property, receivables, shares held in subsidiaries, and others) in principle that are owned by SBM and SBM shares owned by BBM and BBM shares owned by Mobiletech.

6 Trust debt assumption regarding SBM issued straight bonds totaled to JPY100 billion

SBM will entrust certain amount out of the past issued JPY 100 billion straight bond to a trust bank as cash for redemption of bonds together with investment profit of this trust asset. Since this transaction falls under Article 46 of practical guideline regarding financial products accounting (Article 14 of Accounting system committee report of Japanese Institute of Certified Public Accountants), it will be off-balanced from trust debt assumption.

Subject Bonds

  Coupon Issue Date Maturity Date Issue price Outstanding after redemption
SOFTANK MOBILE Corp.*5 First Series Unsecured Bond 2.575% April 28, 1998 April 28, 2008 JPY 25 billion As above
SOFTANK MOBILE Corp.*5 Third Series Unsecured Bond 2.500% August 19, 1998 August 19, 2010 JPY 25 billion As above
SOFTANK MOBILE Corp.*5 Fifth Series Unsecured Bond 2.000% August 25, 1998 August 25, 2010 JPY 25 billion As above
SOFTANK MOBILE Corp.*5 Seventh Series Unsecured Bond 2.280% September 22, 2000 September 22, 2010 JPY 25 billion As above

7 SBM assumption of the debt liability on a non-recourse basis of JPY82.5 billion regarding BBM subordinated loan of JPY100 billion

For the subordinate loan of JPY 100 billion financed from Vodafone by BBM, remaining of JPY 82.5 billion will be treated as debt assumption by SBM once BBM prepays JPY 17.5 billion to Vodafone with BBM loan and loan from SOFTBANK.

[Notes]
  • *2WBS: Whole Business Securitization is one of structured financing schemes. WBS securitizes business based on cash flow generated from the business to gain a higher certainty of repayment of funds.
  • *3WBS Funding is an SPC in the WBS scheme whose purpose is to allot the proceeds from domestic and overseas financial institutions and investors as a lender to SBM through Tokutei Kingai Trust Trustee.
  • *4“The Lender” is formally Mizuho Trust and Banking Co., Ltd. as Tokutei Kingai Trust Trustee entrusted by WBS Funding, however, it is neither WBS Funding nor Mizuho Trust and Banking Co., Ltd. who makes independent decisions but they will made through agreement among domestic and overseas financial institutions and other investors that raise in effect funds. (Lenders, WBS Funding, domestic and overseas institutions and other investors are hereinafter collectively referred to as “The Lenders.”) Individuals and entities that SOFTBANK controls or is controlled by are not included in the domestic and overseas financial institutions and institutional investors as substantial stakeholders.
  • *Notation of face of bond is JAPAN TELECOM CO., LTD. This is issued at the time company name of Vodafone K.K., current SBM, was JAPAN TELECOM CO., LTD. This is different from First Series and Second Series bond issued by JAPAN TELECOM CO., LTD, former SOFTBANK TELECOM Corp.

III Impacts on financial results

Impacts on consolidated financial results for the fiscal year ending March 2007 by the execution of these transactions are not certain as of today and will be communicated as soon as when confirmed.

Scheme Diagram

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