THE GIST
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SoftBank is yet again borrowing money for yet another funding round for OpenAI. The firm is financing its latest investment into the ChatGPT maker via an $11 billion bond sale, breaking down to $10 billion in dollar-denominated notes plus €1 billion in euro-denominated notes.
WHAT HAPPENED
It’s potentially the largest Asia-Pacific and Japan non-financial corporate bond deal on record. The breakdown is as follows: The dollar tranche splits into three maturities, 3.5-year, 5.5-year and 7.5-year notes, while the euro tranche splits into 4-year and 6-year notes.
But the bond sale follows a long pattern of SoftBank taking loans to fund AI. Last year alone, the firm took out $41.5 billion across three separate loans. It also sold its Nvidia position (reported near $5.8–6 billion) to help fund its OpenAI commitments. In February, the company agreed to invest an additional $30 billion in OpenAI. Within a month, it borrowed another $40 billion bridge loan, an unsecured facility with JPMorgan Chase, Goldman Sachs, Mizuho, Sumitomo Mitsui Banking Corp, and MUFG, maturing March 25, 2027.
And just last month, SoftBank sought a fresh $10 billion, two-year loan, proceeds of which are earmarked partly to repay a portion of the March $40 billion bridge loan.
It’s plausible some of these are the same obligation being repeatedly refinanced or resized rather than additive new debt, but still, SoftBank’s cumulative OpenAI commitment is reaching close to $65 billion by October 2026.
WHY IT MATTERS
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SoftBank is financing its AI bet increasingly with borrowed money, rather than proceeds from asset sales. That comes with credit risk. SoftBank’s debt is already speculative grade. S&P cut it to BB in 2023, for too much exposure to a single entity.
Selling $11 billion of bonds at that credit profile, on top of the bridge loan it replaces, just means SoftBank is now funding an AI lab that remains unprofitable at scale with borrowed capital rather than equity alone.
At a time when the broader AI capital-expenditure cycle is drawing scrutiny from investors and analysts, it seems like SoftBank is just throwing money down a very deep well.
WHAT’S NEXT
Locking in 3.5-to-7.5-year junk-grade debt to fund an equity stake is a risky bet. One that has not yet given any rewards. But then again, it was always risky.
The market’s read on this will be based on the coupon SoftBank pays on this deal. That will determine the risk premium investors attach to junk-rated, AI-concentrated leverage.
Disclaimer : This story is auto aggregated by a computer programme and has not been created or edited by DOWNTHENEWS. Publisher: finance.yahoo.com
