(Sept 18): SoftBank Group Corp is closing out the week with nearly US$21 billion (RM85.69 billion) in potential fresh borrowings as it builds out its artificial intelligence (AI) financing capacity. It’s also looking to raise another US$10 billion to US$20 billion next week in a separate jumbo bond deal.
The Japanese conglomerate increased its margin loan backed by shares of its chip unit Arm Holdings plc by US$5 billion to US$25 billion, people familiar with the matter said on Friday. And it recently secured an additional US$450 million to an existing credit line, bringing the total to US$6.5 billion, according to people familiar with that deal.
Apollo Global Management Inc is also in talks to boost the size of a loan to SoftBank by US$3.6 billion to US$9 billion to help it finance its investment in AI giant OpenAI. On top of that, the firm founded and led by billionaire Masayoshi Son secured an US$11.87 billion loan, also to support its OpenAI investment, according to people familiar with those deals.
That flurry of activity translates into committed and potential new debt of US$20.92 billion that will finance its push deeper into AI including a US$65 billion commitment to OpenAI.
One of the world’s biggest investors in AI, SoftBank is at the epicentre of debates about the future of debt-fuelled bets on the sector, at a time when market volatility has increased amid safety warnings.
It’s among tech giants including Oracle Corp and Meta Platforms Inc that are pouring unprecedented amounts of capital into AI technologies and infrastructure. But some investors are getting increasingly worried about the surge in Son’s multibillion-dollar AI projects where the revenue payoff is largely uncertain.
In its margin loan backed by shares of Arm, the Japanese firm renegotiated the terms and signed a deal with creditors this month, said the people, who asked not to be identified discussing private information.
It’s the third time SoftBank is upsizing its margin loan using Arm shares as Son needs billions of dollars to fund his growing AI investments.
The margin loan — where a borrower uses investments like stocks as collateral — began as an US$8.5 billion facility in 2023. It was subsequently increased to US$13.5 billion in 2024 and then to US$20 billion last year.
As of May, SoftBank’s loan was secured by 769 million shares of Arm, representing a 72% stake in the chip designer, according to company filings. SoftBank owns almost 90% of Arm.
SoftBank had drawn US$20 billion from the facility as of December, with the loan set to expire in September 2027. The loan remains priced at an interest margin of about 225 basis points over the benchmark Secured Overnight Financing Rate and a credit adjustment spread of 25 basis points, some of the people said.
The deal drew strong demand, helped by the 142% spike in Arm’s share price this year. SoftBank was initially looking to increase the facility by US$3 billion to US$5 billion, but received about US$7 billion in demand from lenders, the people said. SoftBank could boost the loan further if Arm shares continue to rise, they added.
In its upsized credit line to US$6.5 billion, there are currently more than 20 banks involved, according to people familiar with that deal. It carries an interest margin of 210 basis points over the benchmark Secured Overnight Financing Rate, they added.
SoftBank declined to comment on the increase in the margin loan backed by Arm shares and on the expanded credit line.
The company has also been meeting with fixed-income investors in New York this week to test appetite for a possible junk bond offering that could total US$10 billion to US$20 billion, people familiar with those discussions have said. A deal could come to the market as early as next week, according to other people briefed on the matter.
“We have investor meetings to provide an update in New York on a non-deal basis. Nothing has been determined on bond issuance,” SoftBank said when asked about the meeting.
SoftBank has been on an acquisition spree, led by its OpenAI investment. Other recent purchases include ABB Ltd’s industrial robotics business for US$5.4 billion and data centre-focused private equity firm DigitalBridge Group Inc for about US$3 billion in cash.
To finance those deals, SoftBank has been replacing its shorter-term loans with debt carrying longer maturities to strengthen its financial position. SoftBank repaid this week the entire outstanding balance of US$25.9 billion on a US$40 billion one-year loan to fund its investment in OpenAI.
Among tech giants, Oracle is considered to have one of the highest exposure to spending risk among the major AI players, which is overshadowing robust growth in its cloud-computing division. Meta’s capital expenditure has severely diminished its free cash flow, which is projected to turn negative in the third quarter.
For Son, his growing list of ambitions includes aggressive data centre expansion in the US and France. SB Energy Inc, SoftBank’s US unit, is developing 8.8 gigawatts of data centre capacity across America that is estimated to require US$174 billion in capital spending. SoftBank has also announced plans to build a five-gigawatt data centre in France.
The cost of insuring SoftBank’s debt against default has climbed this year, with credit-default swaps marking a three-year high earlier this week.
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