SoftBank's risky bet and dilemma: issuing high-interest debt of 8.25% to bet billions on OpenAI, triggering a rating warning.

SoftBank Group (SFTBY.US), as an investment giant that has brought hefty returns to many Asian investors in the past, has once again captured market attention with high-yield dollar bonds. Founder Masayoshi Son's recent issuance of $29 billion in hybrid bonds may face significant pressure - this type of bond allows companies to defer interest payments and has a lower priority than senior bonds, therefore requiring a higher yield to attract investors. Specifically, SoftBank has set a yield of 8.25% for the bonds due in 2065, with a first reset date in 2035; while at the same time, the yield for senior bonds due in 2035 is only 6.8%, highlighting the cost pressure of hybrid bonds. In terms of strategic layout, SoftBank is accelerating its stake investment in the AI unicorn OpenAI. In April of this year, SoftBank led a round of financing for OpenAI, pushing its valuation to $300 billion and committing to complete a $30 billion investment by the end of the year. However, as of now, the actual amount invested is only $7.5 billion, significantly behind schedule. To make up for the funding gap, Son has adopted a diversified financing strategy, with a sense of all or nothing: on one hand negotiating to expand the margin loan size backed by stakes in Arm Holdings (ARM.US); on the other hand, continuing to sell T-Mobile US (TMUS.US) stocks, and issuing a 410 billion yen bond to domestic retail investors, setting a record for the largest yen bond issuance in Japan's history. It is worth noting that traditional bank loans are almost absent in the process of large-scale financing - as an investment holding company, SoftBank lacks a stable operating cash flow support, and as of the end of June, its bond holdings have exceeded twice the size of bank loans. The challenges in the venture capital field have further intensified the funding pressure. The poor performance of the Vision Fund has weakened Son's ability to attract large institutional investors, and the complex structure of the corporate group has also put it at a disadvantage in the AI competition. For example, while NVIDIA Corporation recently reached a $100 billion data center cooperation agreement with OpenAI, SoftBank was not able to participate. Rating agencies are closely monitoring SoftBank's loan-to-value ratio (LTV), a key parameter for measuring its credit condition. S&P Global, Inc. has explicitly stated that it will consider downgrading the rating if the LTV exceeds 25%; if the equity of OpenAI, the $6.5 billion acquisition of chip design company Ampere Computing LLC, and undisclosed Stargate investments are included, this threshold could easily be exceeded. Furthermore, over 70% of SoftBank's total assets are disclosed through public markets, significantly narrowing its financial maneuvering space. In comparison, SoftBank's "Stargate" partner, Oracle Corporation, appears much more composed. Despite rising leverage and continued negative free cash flow, Oracle Corporation maintains an investment-grade rating. In its $18 billion bond issuance last month, the portion due in 2035 had an interest rate of only 5.2%. Moody's Corporation ratings point out that Oracle Corporation's strength lies in its leading position in many enterprise software and cloud infrastructure markets, providing substantial support for OpenAI's ability to pay up to $300 billion in cloud contracts. Currently, Son is fully committed to the AI race, but the shadow of funding shortages looms. Facing the grand vision of OpenAI co-founder Sam Altman, whether SoftBank can keep up with this ambitious pace remains a question mark.