Convertible bonds that were part of a complex transaction that allowed Japan’s SoftBank Group (9984.T) to buy a stake in now-collapsed payments company Wirecard and then de-risk the transaction have been put up for sale in an auction.
In a process managed by Credit Suisse, bonds convertible into Wirecard debt with a nominal value of 900 million euros ($1.01 billion) will be sold via an auction set to close on July 8, according to a document seen by Reuters.
Many of Wirecard’s creditors are eager to sell their exposure to the now-insolvent company, as police have raided the German firm’s offices and its administrator has started selling its assets.
The auction should end one of the most complex acquisition structures seen in recent times. Instead of buying a direct stake in Wirecard, SoftBank bought bonds that could be repaid with Wirecard shares.
Soon after, however, Credit Suisse sold 900 million euros of new bonds to investors linked to the convertible bond held by SoftBank, which would be convertible into Wirecard shares. This transaction effectively repackaged SoftBank’s convertible bonds and sold them on at a profit for the Japanese investor.
The structure is one made famous by billionaire investor Warren Buffet, who used to buy stakes with little risk to his company Berkshire Hathway before benefiting immediately from the boost to the share price from his involvement.
The auction would likely represent a significant loss to investors currently holding the convertible bonds; the linked Argentum convertible bonds were trading at a cash price of 13.5 cents on the euro on Thursday, having been as high as 73.5 just three weeks ago.
(This story corrects stock symbol to Softbank Group, not Softbank Corp, in paragraph one)