SoftBank raises $11.1 bn in world’s biggest corporate bond sale

SoftBank has made history by raising $11.1 billion in the world's biggest corporate bond sale, primarily in dollar and euro-denominated bonds. The tech investment conglomerate, led by Masayoshi Son, aimed to fund its significant investment in OpenAI, a leading AI company. This deal highlights the surge in corporate borrowing driven by AI investments, with Amazon and Alphabet also making large-scale bond sales this year.

Following a $6.3 billion bond issue for retail investors, this latest sale could lead to further scrutiny of SoftBank's finances, which may become vulnerable if market sentiment towards OpenAI and AI weakens. SoftBank has committed $64.6 billion to OpenAI, owning around 13 percent of the company, and is also acquiring ABB's robotics business for $5.4 billion and DigitalBridge for $3.1 billion.

The size of its AI-related investments has led to higher yields, and the cost of insuring its debt against default has risen. Fitch Ratings' Satoru Aoyama noted the market's positive response to SoftBank's bond sales, while LSEG data shows this year's hyperscalers' debt issuance has more than doubled. However, the scale of borrowing has contributed to rising global borrowing costs.

SoftBank issued bonds with terms ranging from 3.5 to 7.5 years at interest rates of 8.625 percent, 9.25 percent, and 9.75 percent for dollar-denominated bonds, and 7.125 percent and 8 percent for euro-denominated bonds. The issuance surpasses Numericable Group's $10.9 billion in 2014, making it the largest high-yield corporate bond sale globally so far.

SoftBank has issued $14.6 billion in high-yield bonds this year, accounting for 63.4 percent of the Asia Pacific and Japan high-yield corporate bond market. However, delays in OpenAI's IPO plans and the strain on cash flow have increased credit risks for SoftBank.