SoftBank launches $10 billion of bonds to pay OpenAI

Citigroup and JPMorgan opened books on Monday on a five-tranche senior unsecured sale for SoftBank Group, the Japanese investment company, to raise cash for a $10 billion OpenAI payment due October 1. A term sheet reported by Reuters showed $10 billion of dollar notes and €1 billion of euro notes, without coupon levels. The credit is BB+ at S&P and Fitch, five-year default swaps already sit near the highest since 2023, and S&P said in July that OpenAI would be 20% to 30% of invested assets once this last piece of a $30 billion follow-on lands.

Tokyo’s cash market is closed Monday through Wednesday for Respect for the Aged Day, a national holiday on Tuesday, and Autumnal Equinox, according to the Japan Exchange Group calendar, and reopens Thursday, September 24, the morning the notes are due to price. SoftBank could not be reached. Fund holders will barely feel this in the meantime: the notes are not out yet, and iShares’ Japan equity fund AEWJ held SoftBank at 2.77% as of Friday.

A BB+ credit and a concentrated book

S&P Global Ratings has SoftBank at BB+, with the outlook restored to stable on July 16 after Arm Holdings’ rally. Fitch assigned a first-time BB+ on September 11. Japan Credit Rating Agency lists a long-term A. SoftBank’s own table, dated September 11, matches those three.

Five-year credit-default swaps, the cost of insuring SoftBank’s debt, were indicated around 383.2 basis points on September 16, near the highest since 2023, Bloomberg reported, citing CMA. Sharon Chen, a Bloomberg Intelligence credit analyst, wrote that week that funding costs were rising and that SoftBank’s offshore bonds were trading at wider spreads amid supply concerns and growing OpenAI exposure.

S&P, in July, put Arm at more than 40% of invested assets and said OpenAI would be 20% to 30% after the extra $30 billion, second after Arm. SoftBank’s own loan-to-value ratio, net debt over the equity value of holdings, was 13.0% on June 30, with net debt of ¥10.81 trillion.

The last $10 billion OpenAI cheque

SoftBank said on February 27 that it had already put $34.6 billion into OpenAI through Vision Fund 2 and had agreed a further $30 billion in three $10 billion pieces. Completing that follow-on would take the cumulative cheque to $64.6 billion and about 13% of the company. The first $10 billion closed April 1. The second closed July 1. The third is due October 1, Japan time.

The dollar notes come in 3½-year, 5½-year and 7½-year tenors. The euro notes come in 4-year and 6-year tenors. Settlement is September 29, two days before the OpenAI money is due. Proceeds, the term sheet said, will fund the $10 billion third tranche and go to general corporate purposes. It also said the bonds would cancel a $10 billion bridge loan used for the OpenAI stake.

That is not the $40 billion unsecured bridge signed March 27 with JPMorgan Chase, Goldman Sachs, Mizuho Bank, Sumitomo Mitsui Banking Corporation and MUFG Bank. That facility was scheduled to mature March 25, 2027, and carried no collateral. SoftBank drew $10 billion on April 1 and another $10 billion on July 1. On September 9 it told lenders it would prepay the entire remaining $25.9 billion on September 15. Aggregate draws, it said, had been $30 billion against the $40 billion ceiling.

Two other OpenAI-linked facilities sit in that $10 billion range. SoftBank signed a $10 billion two-year loan on August 6, backed by its OpenAI stake, with Goldman Sachs Bank USA, JPMorgan Chase Bank, Mizuho Securities USA, Apollo Global Funding and Sumitomo Mitsui Banking, with the group as guarantor. In late August it went back to banks for another two-year line that Bloomberg reported was targeting $10 billion at about 275 basis points over SOFR, with Mizuho as mandated lead. People familiar later told Bloomberg that facility closed the week of September 7 at $11.87 billion, with about 20 banks, to support the OpenAI investment. The term sheet’s $10 billion matches the August 6 loan in size; its stated purpose, a bridge for the OpenAI stake, matches the loan that closed at $11.87 billion.

What the last foreign-currency sale paid

SoftBank last sold offshore senior notes on April 16: $1.5 billion and €1.75 billion. The dollar coupons were 7.625%, 8.250% and 8.500% on notes due 2029, 2031 and 2036. Reuters put the euro coupons at 6.375%, 7.0% and 7.375%. This dollar sleeve, at $10 billion, is more than six times that April dollar print.