SoftBank raises $11bn in high-yield debt to fund third OpenAI investment tranche

Key points

• SoftBank is marketing $10 billion in dollar bonds and €1 billion in euro bonds to credit investors, with pricing scheduled for Thursday.
• The proceeds will fund the third tranche of SoftBank’s investment in OpenAI, expected to close next month, alongside the cancellation of $10 billion in spare capacity from a previous bridge loan agreement.
• Initial discussions suggest the dollar bonds, with tenors ranging from 3.5 to 7.5 years, will offer yields between 9% and 10%.
• SoftBank had previously arranged up to $40 billion in bridge loans from lenders including Mizuho to fund its OpenAI investments, with the first two tranches closing in April and July.
• The company aims to keep its loan-to-value ratio below 25% in normal conditions but has indicated this limit could be temporarily breached to support AI sector bets.
• Citi, Goldman Sachs, JPMorgan, and Morgan Stanley are marketing the deal, which had amassed over $8 billion in early orders before officially launching on Monday.

Background

SoftBank has been aggressively expanding its AI portfolio, including a $1 billion joint investment in SB Energy with OpenAI and Nvidia to build data centers. SB Energy recently filed for an IPO, highlighting the reliance on external funding for AI infrastructure. Earlier this year, SoftBank repaid $25.9 billion in bridge loans, signaling a transition from short-term borrowing to longer-term debt structures. The broader AI sector has seen significant stock volatility, including a 13% drop in SoftBank’s OpenAI-related holdings following safety concerns raised by industry leaders in September.

Why it matters

This transaction represents one of the largest high-yield bond deals ever, marking a critical shift in how major tech investors finance AI infrastructure. By moving from bridge loans to long-term junk bonds, SoftBank is locking in capital for OpenAI’s aggressive expansion, which is projected to burn through $280 billion by 2030. The deal underscores the growing reliance on corporate debt to fund AI, pushing the boundaries of credit markets and linking the financial stability of tech giants to the success of AI ventures. It also highlights the interconnectedness of the AI ecosystem, where funding for OpenAI directly impacts partners like Nvidia and Oracle, as well as SoftBank’s own data center revenues.

What to watch

The bond deal is expected to be priced on Thursday, with the third OpenAI investment tranche closing next month. SoftBank will monitor its loan-to-value ratio as it integrates this new debt into its balance sheet. Investors will watch how the market absorbs this large high-yield issuance, which could influence credit terms for other Big Tech firms. The success of the deal will also depend on OpenAI’s ability to execute its spending plans and generate returns, as well as the performance of SB Energy’s upcoming IPO.