SoftBank's $3 billion WeWork financing talks stall with Japan banks: Sources

SoftBank Group Corp'stalksto secure $3billionfromJapan's three biggestbankshavestalled as the lenders have hit internal lending limits to the firm, two people said, complicating a $9.5billionrescue package forWeWork.

TheJapanese technology conglomerate is now likely to enter the new year without theWeWorkfinancingin place, the people said, adding thebanksare also concerned about the risks involved in rescuing the USoffice-sharing startup.

Mizuho Financial Group Inc, Mitsubishi UFJ Financial Group Inc (MUFG) and Sumitomo Mitsui Financial Group Inc (SMFG) are seeking ways to provide thefinancingwhile offsetting exposure, the people said, declining to be identified because the information is not public.

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SoftBank did not respond to a request for comment. Mizuho, MUFG and SMFG declined to comment.

One option is to use some ofSoftBank's26 per cent stake in Chinese e-commerce major Alibaba Group Holding Ltd as collateral, the people said.

"SoftBank is an important client so we want to do everything we can to help, but we have to consider our credit risk," said a senior banker.

Thetalksillustrate the difficulty SoftBank poses forJapan'sbanks. Founder Masayoshi Son's tech juggernaut has long been a lucrative source of corporate lending in the world's third-largest economy, wherebankstypically have to lend at ultra-low interest rates given years of deflation.

ButSoftBank'sgrowing debt and turmoil at major betWeWorkearlier this year also highlight the firm's higher risk profile.

"Bankscannot loosen their credit criteria only for SoftBank," said S&P Global Ratings senior director Ryoji Yoshizawa.

Another option to spread the risk is a syndicated loan, Yoshizawa said, adding this would be time-consuming potentially delayingfinancing.

SoftBank in October said it would launch a $9.5billionbailout ofWeWorkafter the cancellation of the startup's initial public offering due to investor concerns over its corporate governance and co-founder Adam Neumann's hard-partying ways.

Son has said he turned a blind eye to Neumann's management, but that the company is still a solid business.

The domestic bank deadlock led SoftBank to secure a $1.75billionline of credit from Goldman Sachs Group Inc, the people said.

Goldman Sachs declined to comment.

SoftBank has 5.5 trillion yen ($50.28billion) in outstanding bonds and another 4 trillion yen in bank loans, Refinitiv data showed. Its weighted average cost of debt is 3.7 per cent , the seventh-highest among all companies on the Nikkei 225 Stock Average.

Moody's calculations showed the conglomerate's interest coverage ratio is 1.3, meaning group income is enough to service its debt, with some leftover.