SoftBank seeks over $11 billion in junk bond financing; OpenAI bets and Arm mortgage loans increase leverage risk.

SoftBank Group is seeking to issue more than $11 billion in high-yield bonds (i.e., junk bonds) to raise funds for its continued investment in artificial intelligence assets such as OpenAI. With multiple financing methods, including bond financing and Arm share-backed loans, SoftBank's leverage level continues to rise, drawing market attention to financing costs and investment exit pressures.

On September 21, Bloomberg, citing sources familiar with the matter, reported that the issuance included $10 billion in dollar bonds and €1 billion (approximately $1.14 billion) in euro notes. Part of the proceeds will be used to support SoftBank's additional investment in OpenAI, with the investment expected to close next month and bond pricing potentially set for this Thursday. SoftBank has raised nearly $15 billion in the bond market this year, making it one of the largest issuers of high-yield bonds since 2026.

Meanwhile, market pricing of SoftBank's debt has come under significant pressure. The yield on its dollar bonds maturing in 2031 rose to 8.2% earlier this month, a sharp increase from the January low of 6.7%, and credit default insurance costs have also reached recent highs. Against the backdrop of continuously expanding AI investments, rising financing costs and uncertainty surrounding asset exit times are simultaneously testing SoftBank's funding arrangements.

More than $11 billion in junk bonds are in the works, continuing to fuel investment in OpenAI.

SoftBank's proposed bond issuance includes three maturities totaling $10 billion in US dollar bonds and two maturities totaling €1 billion in euro notes. Citigroup is serving as the lead bookrunner and global coordinator for the US dollar bond portion, with Goldman Sachs, JPMorgan Chase, and Morgan Stanley acting as joint global coordinators. For the euro note portion, JPMorgan Chase is the lead bookrunner, with Goldman Sachs and Deutsche Bank participating in the coordination.

SoftBank's total committed investment in OpenAI has reached nearly $65 billion, and its continued investment is expanding its financial exposure to OpenAI. In March of this year, SoftBank arranged a $40 billion bridging loan for additional investment in OpenAI, and has recently repaid $25.9 billion of the outstanding balance.

This bond financing signifies that SoftBank continues to fund its OpenAI investments through new debt. As the size of individual investments continues to increase, the capital tied up in AI assets and future exit strategies are increasingly directly impacting SoftBank's own financing needs.

Arm's mortgage lending expansion and diversified financing channels drive up leverage.

In addition to bond issuance, SoftBank has recently been expanding its asset-backed financing.

According to Bloomberg, SoftBank is seeking to expand its Arm-backed margin loan by $5 billion to $25 billion, while also securing an additional $450 million in credit, bringing the total credit line to $6.5 billion.

Meanwhile, according to reports citing sources familiar with the matter, Apollo Global Management is in talks to increase its loan to SoftBank by $3.6 billion to $9 billion, also to support its investment in OpenAI. SoftBank has also secured a $11.87 billion loan; earlier this year, the company also arranged a $10 billion loan secured by OpenAI equity.

From bonds and equity-backed loans to financing secured by OpenAI equity, SoftBank is raising funds for its AI investments through a variety of means. This increasing availability of financing instruments also means its balance sheet is becoming more sensitive to changes in interest rates, credit spreads, and the valuation of its AI assets.

OpenAI's IPO has been postponed, with financing costs and exit pressures rising simultaneously.

Another source of pressure for SoftBank comes from its exit strategy for OpenAI. OpenAI CEO Sam Altman recently stated that the company will not go public this year. This means that after SoftBank's large-scale investment in OpenAI, it may lack a clear public market exit route in the short term, potentially extending the time its funds are tied up.

If OpenAI goes public in the future, SoftBank's equity stake will have a clearer access to liquidity; however, a delayed IPO means that SoftBank will have to bear financing costs for a longer period while waiting for its investment value to be realized.

Meanwhile, the market pricing of SoftBank's own debt has deteriorated significantly. The yield on its 2031 dollar bonds has risen by about 150 basis points from its low point in January this year, with rising financing costs and widening credit spreads jointly increasing its debt burden.

For SoftBank, the core challenge is shifting from "whether it can obtain funding" to "at what cost to obtain funding and when its AI investments will yield returns." With the OpenAI IPO timeline still unclear, the issuance size and pricing of over $11 billion in junk bonds will become a crucial window for the market to observe SoftBank's leverage level and credit risk.

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