Record-breaking bond issuance! SoftBank plans to issue 1 trillion yen retail bonds in Japan, offering a high interest rate of 4.9% to raise funds from retail investors to bet on OpenAI

According to reports from Zhihu APP, SoftBank Group plans to issue a total of 1 trillion yen (approximately $6.3 billion) in seven-year corporate bonds targeted at retail investors in Japan, marking the largest retail bond issuance in Japanese history. According to documents submitted by the company, the bonds are 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 investing over $60 billion in ChatGPT developer OpenAI and continues to raise funds to meet its related capital obligations. As OpenAI and other hyperscalers see increasing demand for AI tools and services, SoftBank is accelerating data center investments to expand computing capacity supply.

This will be SoftBank’s third retail bond issuance this year—in April and June, the company raised 418 billion yen and 260 billion yen, respectively.

In March this year, S&P Global Ratings downgraded SoftBank’s outlook from “stable” to “negative,” warning that additional investment in OpenAI could hurt its liquidity and credit quality, calling OpenAI one of SoftBank’s “worst quality investments.”

However, the situation reversed in July. With the share price of its chip design company Arm soaring since April (accounting for over 40% of SoftBank’s investment assets), SoftBank’s key financial metrics improved significantly. On July 16, S&P upgraded SoftBank’s outlook from “negative” to “stable” and maintained its “BB+” long-term issuer credit rating—still one notch below investment grade.

S&P stated that the improvement in SoftBank’s key financial indicators exceeded previous expectations. After the completion of a $30 billion additional investment, OpenAI is expected to account for 20% to 30% of SoftBank’s investment assets, becoming the company's second largest investment target after Arm.

Earlier this month, SoftBank announced that its net profit for the fiscal quarter ending March 31 reached as high as 1.83 trillion yen, with quarterly profits surging mainly thanks to the valuation gains from its OpenAI holdings. Previously, SoftBank had considered using OpenAI shares as collateral to obtain a margin loan, and lowered its fundraising goal from $10 billion to about $6 billion.

In addition, the company stated in its financial report that it achieved investment gains of 1.86 trillion yen in the first quarter, mainly from its holdings in chipmaker Intel (INTC.US), which contributed 1.33 trillion yen (approximately $8.5 billion) in profits. Data shows Intel’s share price more than doubled in the three months ending June 30. This gain helped offset the limited valuation growth of OpenAI, in which SoftBank made a major bet, and losses from some assets within its Vision Fund portfolio (including a recent drop in shares of SoftBank’s payment app company PayPay after its IPO). Data shows Vision Fund investment income was 460.06 billion yen, down 30% year-over-year.

In early August, SoftBank secured a $10 billion margin loan collateralized by its shares in U.S. AI giant OpenAI, marking another significant financing move in the company’s aggressive push into AI.

In its latest financial report, SoftBank stated that it reached a two-year loan agreement with Goldman Sachs, JPMorgan, Mizuho Securities USA, Apollo Global Funding, and Sumitomo Mitsui Banking Corporation. SoftBank added that these financial institutions are the lead arrangers of the loan, and the company plans to draw the funds this month.

According to disclosed information, SoftBank will act as guarantor for the loan, and the funds will be used for general corporate purposes of the group and Vision Fund II. SoftBank explained that, in certain circumstances, the loan requires the borrower to provide additional cash collateral or repay the loan early, for example, if the value of OpenAI preferred shares falls sharply.