"Twice in two months, Softbank accelerates issuing 260 billion yen in bonds by 'begging money from retail investors', highlighting the pressure of AI 'eating gold'."

SoftBank Group disclosed on Monday that it plans to raise 260 billion yen (approximately $1.6 billion) through the issuance of subordinated bonds, primarily targeting individual investors in Japan. This comes just two months after the completion of a 418 billion yen retail bond issuance in April. SoftBank is once again issuing subordinated bonds to individual investors, with high financing costs but necessary to provide "blood transfusions" for its AI bet. With investments in OpenAI exceeding $60 billion, this Japanese tech giant's balance sheet is facing unprecedented challenges. According to documents disclosed by the company on Monday, the bonds have a maturity of 35 years, with the issuer having the option to redeem after five years. Pricing is scheduled for June 5th, with the indicative range for the coupon rate in the first five years set at 4.8%-5.6%. This rate level is quite attractive in the current low interest rate environment in Japan, but it also reflects SoftBank's status as a high credit risk issuer, needing to offer sufficient "risk premium" to entice retail investors. Why the urgency? AI investments are swallowing up funds while financing channels shrink SoftBank's return to the retail bond market twice in a short period is due to the rapidly expanding need for funds for AI-related investments, while traditional institutional financing channels are showing signs of tightening. SoftBank's cumulative investment in ChatGPT developer OpenAI has surpassed $60 billion. This is not just a financial investment - SoftBank is seeking to build a complete industry chain around OpenAI, from chips (through Arm) to data centers and applications. This strategic initiative requires continuous and massive capital injections. SoftBank had previously planned to use its stake in OpenAI as collateral to apply for a $10 billion margin loan from banks. However, this plan was significantly reduced. The market interpreted this adjustment as the valuation volatility of OpenAI shares being too high, or limited acceptability of collateral by banks, leading to obstacles in SoftBank's "equity financing" path. With institutional financing channels facing resistance, retail bonds targeting individual investors have become a "backup option" for SoftBank. Despite the 4.8%-5.6% coupon rate being much higher than Japanese government bond yields (close to 0%), retail bonds can offer more stable and predictable cash flows compared to the complexity of margin loans. The yen becomes a favorite currency for financing AI infrastructure SoftBank is not alone. Large-scale bond issuances related to AI infrastructure investments are accelerating globally, and the low-yielding yen has always been one of the favored financing currencies. Earlier this month, Alphabet Inc. Class C, the parent company of Alphabet Inc. (GOOGL.US), priced and issued 576.5 billion yen in yen-denominated bonds, the largest yen bond issuance ever recorded by a foreign company. SoftBank also sold 418 billion yen in retail bonds to individual investors in April and issued $3.6 billion in US dollar- and euro-denominated bonds to institutional investors. These cases collectively reveal a trend: borrowing yen to invest in AI - using low-cost funds in Japan's ultra-loose monetary environment to fuel the global AI competition. Credit concerns: SoftBank's "risk premium" is rising Market concerns about SoftBank's financing capabilities are not baseless. Multiple indicators show that the company's credit risk is increasing: SoftBank's credit default swap (CDS) spreads have widened by about 70 basis points since 2026, placing it among the highest levels among Japanese companies. In March of this year, S&P Global, Inc. downgraded SoftBank's credit rating outlook from "stable" to "negative" due to pressure on liquidity after additional investments in OpenAI. In other words, every time SoftBank issues large amounts of debt, it may be overstretching its limited market credit. If the return on AI investments takes longer than expected, future financing costs may further soar. This may be a high-risk "AI gamble." SoftBank has issued large amounts of bonds to retail investors twice in two months, and if the value of AI-related assets such as OpenAI and SoftBank's Arm continues to rise, current financing costs could be covered by future returns, making SoftBank potentially the biggest winner of the AI era. However, from a cautious perspective, the long investment cycle and uncertain monetization path of AI infrastructure investments, frequent reliance on high-cost subordinated bonds may lead to a "robbing Peter to pay Paul" situation on the balance sheet. If market sentiment reverses, retail investors' enthusiasm for SoftBank bonds may cool down.