SoftBank Seeks $10 Billion Margin Loan Backed by OpenAI Holdings
SoftBank Seeks $10 Billion Loan to Fuel AI Ambitions
SoftBank Group Corp., a Japanese conglomerate, is seeking a $10 billion loan secured by its shares in US artificial intelligence giant OpenAI. According to people familiar with the matter, the two-year margin loan would carry an option for SoftBank to extend the borrowing by an additional year. This move is part of the company's efforts to take on more debt as it pushes into the AI sector.
SoftBank's founder, Masayoshi Son, has been aggressively investing in OpenAI, with large-scale investments in the chatbot maker. The company recently committed an additional $30 billion to OpenAI, following a previous investment of more than $30 billion. In March, S&P Global Ratings lowered the group's credit outlook to negative from stable, citing the potential risks to SoftBank's liquidity and credit quality due to its investments in OpenAI.
Despite the negative credit outlook, SoftBank has been able to secure funding for its OpenAI investments. Last week, the company raised $3.6 billion through a multi-part bond deal, with part of the proceeds earmarked for repaying bridge loans tied to its investments in OpenAI. The offering included a 10-year dollar tranche with an 8.5% coupon, the highest ever for the firm on such a security.
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Key Comparison: SoftBank's Recent Loan Transactions
| Loan | Amount | Interest Rate |
|---|---|---|
| Current margin loan | $10 billion | 7.88% (425 basis points over SOFR) |
| March 2024 loan | $40 billion | Not disclosed |
| November 2023 margin loan | $20 billion | Not disclosed |
| Recent bond offering | $3.6 billion | 8.5% (10-year dollar tranche) |
The current margin loan that SoftBank is seeking has not yet been finalized, and details may change. Discussions have included a potential initial interest margin of about 425 basis points over the benchmark Secured Overnight Financing Rate. SoftBank is no stranger to margin loans, having expanded a margin loan using its shares in Arm Holdings Plc to $20 billion as of November.
The company also holds billions of dollars in stakes in companies such as T-Mobile US, Intel Corp., and ByteDance Ltd., which it could sell down to shore up its finances. A SoftBank representative declined to comment on the matter.
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Investor Takeaway
SoftBank is seeking a $10 billion loan secured by its shares in OpenAI, which may impact its debt levels and AI investments.
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