Bank card debt that facilitated the SoftBank investment put up for auction

FILE PHOTO: The logo of Wirecard AG, an independent provider of outsourcing and private label solutions for electronic payment transactions, is displayed at its headquarters in Aschheim, near Munich, Germany, on July 1, 2020. REUTERS / Andreas Gebert

LONDON (Reuters) – Convertible bonds that were part of a complex transaction that allowed the Japan SoftBank Group (9984.T) to buy a stake in the now collapsed payments company Wirecard and then eliminate the risk that the transaction has been put up for sale at auction.

In a process managed by Credit Suisse, Wirecard’s debt-convertible bonds with a nominal value of 900 million euros ($ 1.01 billion) will be sold through an auction that will 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 raided the German firm’s offices and its manager began selling its assets.

The auction should end one of the most complex procurement structures seen in recent memory. Instead of buying a direct stake in Wirecard, SoftBank bought bonds that could be paid for with Wirecard shares.

Shortly thereafter, however, Credit Suisse sold € 900m 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 at a profit to the Japanese investor.

The structure was made famous by billionaire investor Warren Buffet, who used to buy low-risk stakes for his Berkshire Hathway company before immediately benefiting from the stock price boost for his stake.

The auction would likely represent a significant loss for investors who currently own the convertible bonds; The linked Argentum convertible bonds were trading at a cash price of 13.5 cents per euro on Thursday, having reached 73.5 just three weeks ago.

(This story corrects the stock symbol for Softbank Group, not Softbank Corp, in paragraph one)

Report by Abhinav Ramnarayan, edition by Rachel Armstrong and David Gregorio

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