• Kyodo

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Japan’s three biggest banks have started talks with Softbank Corp. on extending loans of up to ¥1.5 trillion to fund the company’s planned acquisition of Sprint Nextel Corp., the third-largest U.S. telecom carrier, according to banking sources.

Softbank is also considering buying MetroPCS Communications Inc., the fifth-biggest mobile company in the United States, as well as Washington-based Clearwire Corp., a wireless broadband services provider.

Mizuho Corporate Bank, Bank of Tokyo-Mitsubishi UFJ and Sumitomo Mitsui Banking Corp. intend to support Softbank’s apparent attempt to expand overseas on the back of the strong yen, the sources said Friday.

The three banks may initially set up one-year loans and replace them with a long-term syndicated loan once Softbank completes the acquisitions, they said.

Still, with the total cost of purchasing Sprint and MetroPCS estimated at some ¥2 trillion, an official at one of the lenders expressed concern that the move “would likely weaken Softbank’s balance sheet.”

Standard & Poor’s Ratings Services said Friday it has downgraded Softbank’s long-term corporate credit to BBB status, and also placed the carrier’s senior unsecured debt on CreditWatch with negative implications.

Sprint’s financial risk profile is “highly leveraged” and its liquidity is “less than adequate,” the credit-rating agency cautioned.

“We do not believe a potential investment would create meaningful synergies, as the two companies operate in different geographic markets,” it noted.

Softbank aims to acquire more than two-thirds of Sprint and to then snap up a controlling stake in MetroPCS through the U.S. carrier, the sources said. MetroPCS has already agreed to merge with T-Mobile USA Inc., an arm of Germany’s Deutsche Telekom AG.

Earlier this month, Softbank announced plans to buy a smaller rival, eAccess Ltd., raising its total number of subscribers to about 39 million.

If Softbank gains control of the two U.S. carriers, it would become one of the world’s leading communications companies, with more than 100 million users. Sprint currently has roughly 56 million customers and MetroPCS around 9.3 million.

In the U.S. market, Sprint, T-Mobile and MetroPCS lag far behind the two market leaders, Verizon Wireless and AT&T, which each have more than 100 million subscribers.

In a statement Friday, Softbank confirmed it is “currently engaged in discussions with Sprint regarding a potential investment,” after Sprint had announced the previous day the two firms had entered into negotiations.

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