SoftBank pursues new $10 billion loan to finance OpenAI investment

SoftBank Group Corp. is seeking to raise $10 billion through a new loan facility as it intensifies efforts to secure funding for its hefty investments in US artificial intelligence firm OpenAI, according to people familiar with the matter. The two-year loan, arranged by Mizuho Bank Ltd. as lead arranger and bookrunner, carries an interest margin of about 275 basis points over the Secured Overnight Financing Rate (SOFR), these sources said, speaking on condition of anonymity due to the private nature of the discussions.

This financing move comes as the Japanese technology conglomerate, founded by billionaire Masayoshi Son, continues to ramp up its commitments to OpenAI with a planned investment of approximately $65 billion by October. Proceeds from the new loan could be used in part to repay a $40 billion bridge loan that was previously secured for the OpenAI investments earlier this year, the sources noted. The deadline for bank commitments on the facility is August 31, with banks already in early-stage discussions to participate.

SoftBank’s aggressive funding push is part of a wider effort to bolster its position in the burgeoning artificial intelligence sector, despite mounting credit concerns in the market. The company is reportedly considering tapping the bond market with an offering of $10 billion to $20 billion, aimed at refinancing the existing bridge loan. Additionally, SoftBank plans to launch a record retail bond sale in Japan, targeting around ¥1 trillion ($6.3 billion), to meet its investment needs for OpenAI.

Earlier in June, SoftBank secured another $10 billion loan, this one backed by its OpenAI stake and featuring covenants that could require the company to post cash or make early repayments under certain conditions. Both SoftBank and Mizuho Bank declined to comment on the latest loan arrangement.

The new wave of borrowings reflects a broader trend among US technology companies and their global financiers, as the sector prepares to spend trillions of dollars on data centers and artificial intelligence infrastructure in the coming years. So far in 2024, more than $410 billion has been raised through the bond markets by technology firms for data center expansion and AI-related investments, according to Bloomberg News data.

Industry watchers are closely monitoring SoftBank’s financing strategies given the significant credit exposure tied to the rapidly evolving AI sector. The company’s continued push to secure large-scale funding marks one of the most ambitious efforts by a global investment powerhouse to capitalize on the AI boom.