SoftBank Group has initiated a substantial bond sale totaling approximately $11 billion, which includes $10 billion in senior unsecured dollar notes and €1 billion in euro-denominated notes, as outlined in term sheets disclosed by Reuters and Bloomberg on Monday.
This transaction is structured across five tranches, with dollar notes maturing in three and a half, five and a half, and seven and a half years, and euro notes maturing in four and six years.
The pricing for this bond sale is scheduled for 24 September, with settlement expected on 29 September. Details regarding the coupon rates remain undisclosed, and there hasn't been any final guidance provided yet. Citigroup and JPMorgan are spearheading the sale efforts.
The purpose of this fundraising effort relates primarily to SoftBank’s previous commitments, rather than external documentation. In a statement from 27 February, the company pledged $30 billion to OpenAI through Vision Fund 2 at a pre-money valuation of $730 billion, with payments slated for 1 April, 1 July, and 1 October in equal installments.
SoftBank indicated that this investment would initially rely on bridge loans, transitioning to financing through existing assets and other means. This newly issued bond will serve as that replacement, according to the company's own framework.
As of 9 September, SoftBank reported that it had prepaid $25.9 billion of the $30 billion drawn from a previously arranged $40 billion facility, leaving around $4.1 billion outstanding. This refinancing aspect is what makes the recent $11 billion bond issuance appear less like an expansion of debt and more like a strategic financial manoeuvre.
The pricing of the new bonds will be a critical point of interest. For reference, the company’s April notes were issued at rates of 7.625% for three and a half years and 8.250% for five and a half years, while its 2031 dollar bonds were yielding about 8.2% in September, a significant increase from 6.7% in January. Both S&P and Fitch currently assign a BB+ rating to the group, which is the highest level within the speculative grade category.
There is a notable disparity between this pricing and the domestic market. SoftBank’s record retail bond in Japan, which was priced on 4 September, had a yield of 4.75%, approximately 350 basis points lower than what offshore institutional investors seek for similar credit risks.
SoftBank's balance sheet continues to grow steadily. On 18 September, the company expanded a credit facility to $6.5 billion, divested its entire $5.8 billion investment in Nvidia, and approximately $9.2 billion worth of T-Mobile shares. The company has also put Arm up as collateral for a $25 billion margin loan.
It’s important to note that Arm itself has not been sold, a detail that can often be overlooked. According to its calculations, SoftBank reports a loan-to-value ratio of 13% as of 30 June; S&P estimates this figure at 33%.
To date, SoftBank's cumulative investment in OpenAI amounts to $64.6 billion for a 13% stake, acquired at a $730 billion pre-money valuation. OpenAI is currently in discussions for a private fundraising round that is expected to result in a significantly higher valuation, with final terms anticipated on 24 September.
