SoftBank Raises Junk Bonds to Fund OpenAI

SoftBank is preparing a massive issuance of high-yield bonds to finance a new payment related to OpenAI. This operation, combined with an extension of its debt maturity, could temporarily push it beyond its internal debt threshold.

The Risk of a Temporary Breach of SoftBank's Leverage

The shift from short-term loans to longer-term debt could lead SoftBank to temporarily exceed its own debt limit. Future revenues from the group's data center division depend on its contractual agreements with OpenAI. According to OpenAI's forecasts, nearly $280 billion in cash is expected to be utilized by the end of 2030.

Amounts, Currencies, and Timing of the Issuance

SoftBank aims for an issuance of approximately $10 billion and €1 billion in high-yield bonds. The terms of this operation are expected to be set on Thursday, with the payment to OpenAI scheduled for October. This fundraising is intended to finance a new payment related to SoftBank's stake in OpenAI.

From Short to Long Term, Unlike Other Giants

SoftBank initially planned short-term loans of up to $40 billion for OpenAI but is now looking to replace them with longer-term debt. The bonds issued fall into the junk bond category, which offers high interest rates but carries a greater credit risk. Unlike SoftBank, most major tech companies have recently opted for bonds considered to be safer.