SoftBank Raises Record $11.1 Billion in High-Yield Bonds to Fund Final OpenAI Payment

SoftBank Group has issued $11.1 billion in dollar- and euro-denominated senior notes, a filing showed Thursday, in what several outlets are calling the largest high-yield corporate bond sale on record. The company said the proceeds will fund the $10 billion third and final tranche of its $30 billion follow-on investment in OpenAI, a payment expected to close on October 1, according to CNBC and TradingView.

Deal Structure and Pricing

The dollar portion of the sale was split into three tranches, according to a filing cited by Moneycontrol: $1 billion at a 3.5-year term paying 8.625%, $4.5 billion at 5.5 years paying 9.25%, and $4.5 billion at 7.5 years paying 9.75%. The euro portion consisted of two €500 million tranches, with four- and six-year maturities yielding 7.125% and 8%, respectively. Kyodo News reported that the bonds, sold to overseas investors, mature between 2030 and 2034.

Those coupons stand well above SoftBank's last comparable financing. A $7.3 billion senior dollar- and euro-denominated bond sale in June 2021 carried yields ranging from just 2.125% to 5.25%, according to Free Malaysia Today and Yahoo Finance, underscoring how much more expensive it has become for SoftBank to borrow.

A Record-Setting Sale

LSEG data cited by Free Malaysia Today and Yahoo Finance shows the offering is the largest high-yield corporate bond issuance globally on record, surpassing French telecoms firm Numericable Group's $10.9 billion deal from 2014. The sale follows a separate 1 trillion yen ($6.3 billion) retail bond issue this month, according to Free Malaysia Today, adding to a rapid succession of financing moves tied to SoftBank's AI ambitions.

Funding the OpenAI Stake

Completion of the $10 billion payment will bring SoftBank's cumulative commitment to OpenAI to $64.6 billion and give it roughly a 13% stake, according to Free Malaysia Today and CNBC. Kyodo News separately reported that SoftBank has already invested $54.6 billion in OpenAI and plans to use the newly raised funds for the October payment. Beyond OpenAI, SoftBank is also acquiring ABB's robotics business for $5.4 billion and DigitalBridge for $3.1 billion, per Free Malaysia Today and Yahoo Finance.

TradingView, citing a Benzinga report, noted that Apollo Global Management is separately in talks to increase its loan to SoftBank's Vision Fund II from $5.4 billion to as much as $9 billion, and that a SoftBank executive said on the company's fourth-quarter earnings call that its OpenAI holdings could be used as collateral for financing, including through a margin loan.

Market Reaction

Reports diverged on how SoftBank's Tokyo-listed shares responded. CNBC reported that shares jumped more than 7% on Thursday as Japanese markets reopened after a three-day holiday and the bond issuance was announced. Free Malaysia Today reported that the shares ended Thursday up 0.6% after the same reopening. Both accounts agree Tokyo markets were closed Monday through Wednesday for national holidays. The two figures are not reconciled in the available reporting; as interpretation, a large intraday gain followed by a much smaller closing gain would be consistent with early strength fading during the session, but neither source states that.

Credit markets showed a clearer signal of rising caution. The cost of insuring SoftBank's debt against default has risen sharply, with the five-year credit default swap spread exceeding 400 basis points this week compared with around 280 basis points in June, according to Free Malaysia Today. By our calculation, that is a 120 basis-point increase, or roughly a 42.9% rise, using the formula (400 − 280) / 280 × 100. This is a straightforward arithmetic comparison of the two reported spread levels, not a market forecast.

Analyst Views on Risk and Ratings

Fitch Ratings senior director Satoru Aoyama told Free Malaysia Today he was "positively surprised by the market appetite," adding: "Hyperscalers in the US have been raising debt but they have high credit ratings. Now AI-driven debt issuance has reached the high-yield market at scale."

Not all assessments were sanguine. CreditSights' head of telecom and media Mark Chapman wrote in a note, cited by Free Malaysia Today, that "Risks for SoftBank credit are material and have increased as concentration has increased and cash flow has come under material strain," calculating that holdings in Arm and OpenAI account for three-quarters of the group's asset value at current levels. S&P Global Ratings' Makiko Yoshimura wrote, per the same report, that Arm's strong share price performance has supported SoftBank's credit quality, such that the delay to OpenAI's initial public offering does not have an immediate negative impact on the group's creditworthiness. Chapman also sees potential for a ratings upgrade in the intermediate term if OpenAI's IPO is "timely and successful," Free Malaysia Today reported.

The financing push comes after planned listings of OpenAI and SoftBank's data centre development subsidiary SB Energy — both of which had been set to launch as early as this month — were delayed in recent weeks, removing a potential source of cash, according to Free Malaysia Today and Yahoo Finance. Free Malaysia Today reported that the fundraising is likely to prompt further scrutiny of SoftBank's finances, which could become vulnerable should market sentiment towards OpenAI and the artificial intelligence sector weaken significantly; CNBC similarly reported that investors have increasingly scrutinised how SoftBank will finance its AI ambitions and the impact of rising leverage on its balance sheet.

Bottom line: SoftBank has locked in $11.1 billion of high-yield funding at coupons of 7.125% to 9.75% to complete its $10 billion final OpenAI payment, due to close on October 1, according to company filings cited by CNBC, Moneycontrol and TradingView. LSEG data cited by Free Malaysia Today and Yahoo Finance make it the largest high-yield corporate bond sale on record. The pricing gap versus SoftBank's 2021 issuance and the widening of its five-year credit default swap spread — from around 280 basis points in June to above 400 basis points this week, per Free Malaysia Today — show the higher cost attached to that funding. This is a summary of reported figures, not investment advice or a forecast.