SoftBank plans record US$6.3 billion retail bond sale in Japan

SoftBank Group is preparing to launch a record ¥1 trillion (US$6.3 billion) retail bond sale, the largest issuance by any issuer in Japan, to raise capital for its investments in OpenAI. The seven-year bonds, which will be priced on September 4, are expected to carry a coupon ranging from 4.3% to 4.9%. This move is part of a global trend of tech giants amassing funds to lead in artificial intelligence, with Alphabet, Meta Platforms, Microsoft, and Amazon.com committing nearly US$2.4 trillion to AI-related spending over the next few years.

Alibaba Group recently raised US$10 billion in Hong Kong, further indicating the intense competition in AI. SoftBank has already pledged over US$60 billion to invest in OpenAI and is expanding data center capacity to support AI advancements. The company's decision to issue retail bonds comes as concerns about AI monetisation, overcapacity, and corporate debt persist.

Yuuki Fukumoto, a financial researcher at NLI Research Institute, believes retail investors will be interested in the bond's attractive yield, and the company is confident it can attract demand despite the challenging fixed-income market. SoftBank's third retail bond sale this year, following issues of ¥418 billion in April and ¥260 billion in June, is likely to price at the higher end of the indicated coupon range.

Analyst Sharon Chen from Bloomberg Intelligence expects the company to face a funding shortfall of more than US$20 billion after this bond issuance, suggesting a high probability of offshore bond issuance in the near term. SoftBank's outlook was revised to stable from negative by S&P Global Ratings in July, with a long-term issuer credit rating of BB+, one notch below investment grade.

The company has also considered a margin loan secured by its OpenAI stake, potentially reducing its fundraising target to around US$6 billion.