Glenn, good call on your post yesterday on softbank.
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TOKYO, June 1 (Reuters) - Japanese Internet investor Softbank Corp <9984.T> said on Thursday its U.S. unit sold part of its stake in Internet portal Yahoo Inc <YHOO.O>, a move analysts said may help finance its planned purchase of a failed bank.
"It means they finally have the cash for NCB (Nippon Credit Bank) they didn't have the first time," said Thomas Rodes, analyst at Nikko Salomon Smith Barney.
Softbank America Inc sold 3.16 million shares in Yahoo to bank a $336 million profit, reducing its stake to 22.58 percent from 23.18 percent, Softbank Corp said.
Yet the sale underscored the view that Softbank has limited options if it needs to generate cash and some analysts suggested it should abandon its move for NCB as the purchase would push it too far from its core business.
"(Buying) NCB is a mistake," Rodes added.
Softbank and its consortium partners failed to agree terms for NCB with the government by Wednesday's deadline, but not everyone saw that as a bad thing.
"It was positive news. I have been sceptical about Softbank's plan to buy NCB as it would not fit well into its Internet-based business strategy," said Kota Nakako, an analyst at UBS Warburg.
NCB, which collapsed under the weight of bad loans made in an asset-price bubble a decade ago, is a conventional "old Japan" bank that specialises in real estate-related lending. It was placed under state control in December 1998.
"Softbank hasn't shown any clear-cut plan on how to make use of NCB. From the viewpoint of its cash position it might be better for Softbank to abandon the purchase," said Soichiro Fukuda, analyst at IBJ Securities.
LENDING STRATEGY ILL-ADVISED
Its shares tumbled 8.44 percent on Wednesday after news that it had failed to agree terms for NCB but rebounded 4.24 percent on Thursday as the market decided that was good news.
"Softbank shares were apparently oversold yesterday... the NCB 'setback' is positive," Nakako said.
On Thursday, Softbank shares ended at 17,200 yen, more than 70 percent below their peak in February due to doubts about high-tech valuations and volatility in U.S. markets.
Softbank has said it would use NCB as a lender to start-up ventures. But the main financing vehicle for start-ups should be equity investment because young firms usually have insufficient collateral to risk against loans, analysts said.
"Bank loans cannot serve as the risk capital that young firms need. Thus, NCB would play only a marginal role in financing venture firms," said an analyst at a major Japanese brokerage.
Analysts say they are concerned about possible hidden problem loans in NCB's portfolio and this issue was a major reason behind the failure of talks between the consortium and the government.
DIVISION OVER LOAN-LOSS PROVISIONS
A senior government official said on Wednesday there were wide differences between the two sides over the size of loan-loss provisions which the government would put up against NCB's problem loans before selling the bank.
The consortium demanded higher provisions but the government refused, saying that would raise the amount of taxpayers' money injected into NCB.
Even if the two sides agreed on loss provisions, there was no guarantee hidden problem loans would not surface later.
In fact, after the failed Long-Term Credit Bank of Japan was sold to U.S. investment group Ripplewood Holdings in February, some of its main borrowers such as Dai-Ichi Hotel <9710.T> collapsed, turning some of its loan portfolio sour.
"Dealing with various problems at NCB requires lots of energy on the part of management. I don't know why Softbank wants to buy such a troubled bank," said Nakako of UBS Warburg.
07:13 06-01-00 |
