SoftBank Group Corp. is preparing for a record retail bond sale in Japan, aiming to raise \1 trillion ($6.3 billion) to support its substantial investment commitments to OpenAI. This marks the largest retail bond offering by any issuer in Japan, with the 7-year bonds expected to be priced on September 4th and carrying an indicative coupon range of 4.3% to 4.9%. This move is part of SoftBank's broader strategy to finance its increasingly ambitious artificial intelligence (AI) initiatives, as the company has pledged over $60 billion to OpenAI.
This $6.3 billion retail bond sale is the latest in a series of fundraising efforts by SoftBank, which has consistently tapped the domestic retail market. The company has previously issued bonds named after its baseball team, the "Fukuoka SoftBank Hawks Bonds," known for offering higher yields than traditional bank deposits. Retail investors have been a crucial source of financing, enabling SoftBank to raise significant capital in Japan, even as global investors sometimes demand steeper premiums for AI-related ventures. Analysts suggest that the new retail bond's pricing will likely lean towards the upper end of the indicated coupon range.
The conglomerate's aggressive fundraising reflects its deep commitment to AI, including accelerating investments in data centers to expand computing capacity. SoftBank's cumulative investments and commitments to OpenAI are anticipated to exceed $60 billion, deployed in tranches, with a third $10 billion tranche due in October. This substantial debt aligns with founder Masayoshi Son's view that AI will require significant investment, positioning the current bonds as a crucial down payment on this long-term strategy. The proceeds from this bond issuance will be used for AI-related investments and to repay previously issued bonds. The company expects the bonds to receive an A rating from Japan Credit Rating Agency.
While this new bond issue provides significant capital, SoftBank may still face a funding shortfall exceeding $20 billion, indicating a high likelihood of additional offshore bond issuance in the near future. Ratings agencies have taken note of SoftBank's aggressive investment strategy; S&P revised its outlook to stable from negative in July, affirming a BB+ long-term credit rating, while Moody’s maintains a Ba2 rating, both placing SoftBank in speculative territory. The company has also monetized other holdings, such as its Nvidia stake, and expanded financing secured by its Arm shares to help fund its AI push. This record retail bond issuance underscores SoftBank's reliance on Japanese retail demand to fuel its AI ambitions.
