SoftBank Raising $11 Billion in Bonds to Cover OpenAI Payment
SoftBank Group has launched a bond sale of approximately $11 billion, comprising $10 billion in senior unsecured dollar notes and an additional €1 billion in euros. According to term sheets reported by Reuters and Bloomberg, the deal consists of five tranches with varying maturity dates: three and a half, five and a half, and seven and a half years for dollar notes, and four and six years for euro notes. Pricing is set for September 24th, with settlement on September 29th. Coupons and final guidance have yet to be reported, with Citigroup and JPMorgan leading the sale.
What's the Money For?
The purpose of this financing is outlined in SoftBank’s own filings rather than the term sheets. In a February 27 announcement, the company committed $30 billion to OpenAI through Vision Fund 2 at a pre-money valuation of $730 billion, payable in three equal installments: April 1st, July 1st, and October 1st.
SoftBank stated on September 9th that it had prepaid $25.9 billion of the $30 billion drawn against a $40 billion facility arranged in March, leaving approximately $4.1 billion outstanding. This new bond sale, therefore, serves as refinancing rather than additional funding.
Pricing to Watch
Interest rates will be a key focus area. SoftBank’s April notes carried rates of 7.625% for three and a half years and 8.250% for five and a half years. Its 2031 dollar bond was yielding around 8.2% in September, up from 6.7% in January. S&P and Fitch both rate SoftBank BB+, the top rung of speculative grade.
The contrast with the domestic market is notable. SoftBank's recent record retail bond in Japan, priced on September 4th at 4.75%, is roughly 350 basis points below what offshore institutional investors are demanding for similar credit.
A Balanced Sheet Under Expansion
SoftBank has been actively expanding its balance sheet:
- Widened a credit facility to $6.5 billion on September 18th.
- Sold its entire $5.8 billion Nvidia stake and approximately $9.2 billion of T-Mobile shares.
- Pledged Arm against a $25 billion margin loan, with loan-to-value at 13% based on SoftBank’s own methods as of June 30th (S&P assessed it at 33%).
Cumulative investment in OpenAI stands at $64.6 billion for a stake of around 13%, acquired at a $730 billion pre-money valuation. OpenAI is currently discussing a private round at a significantly higher valuation, with final terms due on September 24th.
By: Ana-Maria Stanciuc, Editor-in-Chief, TNW
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