SoftBank (SFTBY.US) issues $11.1 billion high-yield bonds for OpenAI! Financing pressure is emerging behind the continued increase in AI gambling

The Zhitong Finance App learned that SoftBank (SFTBY.US) issued a total of 11.1 billion US dollars and Euro-denominated high-yield bonds on Thursday to raise cash to continue increasing investment in the field of artificial intelligence (AI). According to the documents, SoftBank issued three batches of dollar-denominated senior notes, with a term of 1 billion US dollars, a term of 3 and a half years, 4.5 billion US dollars, a term of 5 and a half years, and 4.5 billion US dollars with a term of 7 and a half years, respectively. These bonds have coupon interest rates of 8.625%, 9.25%, and 9.75%, respectively. According to the documents, SoftBank also issued two batches of Euro-denominated senior notes worth 500 million euros each. The terms are 4 and 6 years, respectively, and the yield is 7.125% and 8%, respectively.

The money raised from these bonds will be used to pay the final $10 billion of SoftBank's commitment to invest $30 billion in ChatGPT developer OpenAI. Once completed, SoftBank's total investment in OpenAI will reach $64.6 billion.

Meanwhile, the market pricing of SoftBank debt is already clearly under pressure. The yield on its 2031 dollar bond maturing once rose to 8.2% earlier this month, up sharply from the January low of 6.7%, and the cost of credit default insurance also rose to a high level in recent years. As the scale of AI investment continues to expand, rising financing costs and uncertainty about asset exit times are simultaneously testing SoftBank's funding arrangements.

In addition to issuing bonds, SoftBank has also recently expanded the scale of financing based on asset collateral. According to people familiar with the matter, SoftBank has increased the size of a margin loan secured by shares of its chip division Arm Holdings (ARM.US) to 25 billion US dollars.

A margin loan means that the borrower uses investment assets such as stocks as collateral. SoftBank initially secured a loan of 8.5 billion US dollars in 2023 using Arm shares as collateral. This amount was then raised to US$13.5 billion in 2024, and to US$20 billion last year. As of December of last year, SoftBank had withdrawn $20 billion from this loan amount, which will expire in September 2027. People familiar with the matter said that SoftBank renegotiated loan terms and signed an agreement with creditors this month.

This is the third time SoftBank has used Arm shares to expand the scale of margin loans. As founder Sun Zhengyi needed billions of dollars to fund growing AI investments, including a nearly $65 billion commitment to ChatGPT developer OpenAI, SoftBank is continuing to expand the scale of financing.

Last month, SoftBank also obtained a $10 billion two-year loan from lenders, including Apollo Global Management (APO.US), using its OpenAI shares as collateral. It was reported this week that Apollo is in talks with SoftBank to increase the size of a loan from $5.4 billion to $9 billion to help the Japanese company continue to fund its investment in OpenAI.

In addition to investing heavily in OpenAI, SoftBank's actions in the AI field include the acquisition of ABB Ltd.'s industrial robotics business for US$5.4 billion and the acquisition of DigitalBridge Group Inc., a private equity firm focused on data centers for approximately US$3 billion in cash. For Masayoshi Sun, his growing AI ambitions also include a major expansion of data centers in the US and France. SB Energy Inc., an American subsidiary of SoftBank, is developing data center production capacity totaling 8.8 gigawatts across the US, with an estimated capital expenditure of 174 billion US dollars. SoftBank also announced plans to build a 5 GW data center in France.

As Sun Zhengyi's multi-billion dollar AI projects continue to increase, and the future revenue returns these projects can bring are still largely uncertain, investors are increasingly concerned about this surge in spending. From bonds to share mortgages to financing secured by OpenAI shares, SoftBank is raising capital for AI investments in a variety of ways. The increasing number of financing instruments also means that its balance sheet is more sensitive to changes in interest rates, credit spreads, and the valuation of its AI assets.

For SoftBank, another layer of pressure comes from OpenAI's delay in listing. This means that after SoftBank previously invested in OpenAI through large-scale financing, it may lack a clear channel to exit the open market in the short term, and the time required for related capital may also be further extended. If OpenAI goes public in the future, the relevant shares held by SoftBank will receive more clear liquidity channels. However, the delay in listing means that SoftBank will need to bear financing costs for a longer period of time while waiting for the investment value to be realized.

For SoftBank investors, the current core conflict is gradually shifting from “whether capital can be obtained” to “how expensive to obtain capital, and when can AI investments pay off”. With OpenAI's listing schedule still unclear, the issuance scale and pricing of more than 11 billion US dollars of junk bonds will also become an important window for the market to observe SoftBank's leverage level and credit risk.