Softbank to sell most of 4% stake in Yahoo to repay Citibank loan

Softbank Corp. said Friday it will pocket a handsome profit by repaying a $1.135 billion loan it took out from Citibank in the U.S. with its 4% stake in Yahoo! Inc., which is worth around $650 million at current market value.

After taking on mountains of debt to buy Vodafone Group PLC's Japan operations in the mid-2000s, Softbank was able to transform itself from an internet provider to Japan's third largest and fastest growing cellphone carrier.

While its debt burden was a cause for concern among investors back then, when the company snagged the rights to market Apple's iPhone in Japan its coffers quickly filled with gold.

Under the terms of a deal struck in February 2004, Softbank agreed with Citi that it would repay the major U.S. bank with a specified number of Yahoo shares. Softbank obtained the Yahoo shares in 1995 when the California-based internet company was still in its infancy.

The difference between what the company paid for those shares in 1995 and the Citi loan will be booked as an extraordinary profit of $990 million in the current fiscal year ending in March, Softbank said, noting the one-off profit will likely boost its net profit for the fiscal year by about Y44.7 billion.

Yahoo! Inc. shares closed at $12.87 Thursday. At that price, the market value of a stake of about 4% in the company would be about $650 million. After the loan repayment, Softbank's stake in Yahoo will drop to 0.002%.

Softbank remains Japan's only carrier of the iPhone and iPad and has enjoyed a strong earnings growth over the past few years thanks to the popularity of the Apple products.

In the last fiscal year, it posted a group net profit of Y189.71 billion, on revenue of Y3.005 trillion.The robust growth in the company's mainstay mobile carrier business has been helping the company pay off its debts.

The company's net interest-bearing debt, which peaked at Y2.387 trillion in 2006 after taking over Vodafone's mobile phone business in Japan, had shrunk to about Y1.1 trillion as of the end of June. The amount will further decline as a result of the Citi loan repayment, the company said.

In July, Standard & Poor's Ratings Services raised its long-term credit and debt ratings on Softbank to BBB- from BB+ and removed them from CreditWatch following the company's recent decision to refinance its debt.

A Softbank spokeswoman said that unit Yahoo Japan, which operates independently from Yahoo Inc., won't be affected by the divestment of U.S. Yahoo shares. Citi's Japan office referred enquiries to the U.S., where a spokesman was not immediately available for comment. Repayment for the loan is due at the end of September.