SoftBank Group Corp. recently secured an $11.87 billion loan to support its investment in OpenAI. This two-year facility, up from an initial target of $10 billion, attracted commitments from about 20 banks and was sealed last week. This new borrowing adds to SoftBank's significant debt financing activities related to its bet on OpenAI.
Prior to this, SoftBank had obtained a $40 billion bridge loan earlier this year to finance its OpenAI investment. The company announced its intention to repay the outstanding balance of $25.9 billion on September 15. Additionally, SoftBank secured a $10 billion margin loan in August, backed by its stake in OpenAI, with a consortium including Goldman Sachs Bank USA, JPMorgan Chase Bank NA, Mizuho Securities USA LLC, Apollo Global Funding LLC, and Sumitomo Mitsui Banking Corp. as lenders.
These financing efforts are part of a larger strategy as SoftBank is slated to invest nearly $65 billion in OpenAI by October. The company has already raised approximately $37 billion this year through various debt instruments. SoftBank is also exploring a potential junk-bond sale of $10 billion to $20 billion, with meetings scheduled with investors in New York to gauge interest.
Concerns have been raised regarding the structure of SoftBank's OpenAI investment, as it is heavily debt-funded and secured by the illiquid OpenAI shares themselves. This leveraged bet relies on private valuations, and a sharp drop in OpenAI's value could trigger demands for additional collateral. Despite trading at roughly half its net asset value, SoftBank continues to sell liquid assets to acquire illiquid stakes, then borrows against these illiquid stakes, potentially pushing its loan-to-value beyond its own policy limits.
The sustainability of this strategy hinges on OpenAI's valuation remaining stable and credit markets continuing to roll over SoftBank's debt. The market's skepticism is reflected in SoftBank's shares tumbling as much as 13% on September 14, the most since July 17.
