SoftBank Mulls Up to $20 Billion Bond Sale for OpenAI Financing

SoftBank Group Corp. is exploring a bond sale ranging from $10 billion to $20 billion to help refinance a loan tied to its investment in US AI company OpenAI, according to sources familiar with the situation. The bond, potentially denominated in dollars and euros, could be issued as early as September, said the sources, who requested anonymity on the grounds of the private nature of the discussions. These talks are still in progress, with details potentially subject to change.

The funds raised from this bond sale would partly be used to repay the $40 billion bridge loan that SoftBank secured earlier this year to finance its OpenAI investment. The Japanese conglomerate, founded and led by billionaire Masayoshi Son, is set to invest around $65 billion in OpenAI by October, with a portion of these funds coming from loans.

The bond offering would add to the increasing trend of companies raising capital to expand their AI presence, despite warnings about mounting credit risks and the uncertainty surrounding the profitability of such investments. Some firms are even turning to junk bond investors for AI-related financing, including those with investment-grade debt, as competition for capital intensifies.

In the United States alone, tech firms have earmarked billions of dollars for AI infrastructure in the coming years, with over $410 billion borrowed so far this year in the bond markets, according to Bloomberg News data.

SoftBank is considering various options for refinancing the bridge loan but has not yet decided on the exact amount, the spokesperson said in an emailed response. Notably, SoftBank is venturing into the 144A bond format for the first time in more than a decade, which permits the sale of notes to institutional investors in the United States. This could help the company tap into a larger pool of capital and potentially increase demand for the offering.

Should the bond sale reach the upper limit of its target range, it would be the largest deal from any Asian firm this year, according to Bloomberg data. It would also mark SoftBank's second bond issuance in the offshore market this year, following a $3.6 billion dollar and euro bond sale in April, which included a 10-year issue with a record 8.5% coupon.

The yields on these dollar notes remained relatively stable in early trading on Wednesday. SoftBank is also planning a record ¥1 trillion ($6.3 billion) retail bond sale in Japan early next month and has recently secured a $10 billion margin loan backed by its OpenAI stake, which includes covenants that may require the company to post cash or repay early.