Record-breaking bond issuance! SoftBank plans to issue 1 trillion yen retail bonds in Japan, raising funds at a 4.9% high interest rate to retail investors, betting on OpenAI.

SoftBank Group plans to issue a total of 1 trillion yen (approximately $6.3 billion) in 7-year corporate bonds targeted at retail investors in Japan, which will become the largest retail bond issuance in Japanese history. According to documents submitted by the company, the bond is expected to be priced on September 4, with a coupon rate guidance range of 4.3% to 4.9%. This issuance comes as SoftBank has committed to invest over $60 billion in ChatGPT developer OpenAI and continues to raise funds to fulfill its funding obligations. As demand for AI tools and services from OpenAI and other hyperscalers continues to grow, SoftBank is accelerating investments in data centers to expand computing capacity supply. This will be SoftBank's third retail bond issuance this yearhaving raised 418 billion yen and 260 billion yen in April and June, respectively. In March, S&P Global, Inc. downgraded SoftBank's outlook from "stable" to "negative," warning that additional investments in OpenAI could harm liquidity and credit quality, noting that OpenAI is one of SoftBank's "worst credit quality investments." However, the situation reversed in July. As the share price of its chip design company Arm soared since April (accounting for over 40% of SoftBank's investment assets), SoftBank's key financial metrics improved significantly. On July 16, S&P raised SoftBank's outlook from "negative" to "stable," maintaining its "BB+" long-term issuer credit ratingstill one notch below investment grade. S&P stated that the extent of the improvement in SoftBank's key financial metrics exceeded previous expectations. S&P estimates that once the $30 billion additional investment is fully completed, OpenAI will account for 20% to 30% of SoftBank's investment assets, becoming the second-largest investment target after Arm. Earlier this month, SoftBank announced that its net profit for the fiscal quarter ending March 31 reached a staggering 1.83 trillion yen, a significant quarterly increase mainly attributed to the valuation gains on its stake in OpenAI. Previously, SoftBank had considered using its shares in OpenAI as collateral for margin loans and had lowered its fundraising target from $10 billion to approximately $6 billion. Additionally, the company noted in its earnings report that it achieved investment income of 1.86 trillion yen in the first quarter, primarily from its holding in chip manufacturer Intel Corporation (INTC.US), which contributed 1.33 trillion yen (approximately $8.5 billion) in profits. Data shows that Intel Corporation's stock price more than doubled in the three months ending June 30. This portion of gains helped offset the impact of limited valuation growth in OpenAI, in which SoftBank invested heavily, as well as declines in some assets within its Vision Fund investment portfolio (including a recent drop in the stock price of SoftBank's payment application company PayPay). Data indicates that the Vision Fund's investment income was 460.6 billion yen, a year-on-year decrease of 30%. At the beginning of August, SoftBank secured a $10 billion margin loan collateralized by its shares in the American AI giant OpenAI, marking another significant financing action in the companys substantial investment in the AI sector. In its latest financial report, SoftBank stated it has reached an agreement with Goldman Sachs Group, Inc., JPMorgan Chase, Mizuho Securities USA LLC, Apollo Global Management, Inc., and Sumitomo Mitsui Financial Group, Inc. Sponsored ADR for this two-year loan. SoftBank added that these financial institutions are the lead arrangers of the loan, and the company plans to draw down the funds this month. According to disclosed information, SoftBank will act as the guarantor for this loan, and the loan proceeds will be used for general corporate purposes of the Group and its Vision Fund II. SoftBank stated that in certain situations, the loan requires the borrower to provide additional cash collateral or to repay the loan early, such as in the event of a significant decline in the value of OpenAI's preferred shares.