SoftBank leans on debt

SoftBank is borrowing in three directions at once: its telecom unit drew more than €4.2 billion of orders for a first euro bond, the parent priced ¥418 billion of hybrid notes in Japan on April 10, and Bloomberg reported in March that the group was also seeking a loan of as much as $40 billion. (theedgesingapore.com) (bloomberg.com 1) (bloomberg.com 2) The reason is simple: Masayoshi Son wants far more exposure to artificial intelligence, and that push now needs cash faster than SoftBank can generate it from ordinary operations. Bloomberg reported on March 6 that most of the proposed $40 billion loan would help finance SoftBank’s investment in OpenAI. (bloomberg.com) A bond is just an I.O.U. sold to investors, and SoftBank is testing how many I.O.U.s the market will absorb before lenders demand a higher price. The euro sale matters because it lets SoftBank tap a new pool of European money instead of relying only on Japan and the United States. (bloomberg.com) (theedgesingapore.com) The telecom borrower here is SoftBank Corp., which is the listed mobile-phone and internet unit, not SoftBank Group Corp., which is the investment-heavy parent that owns stakes and makes big bets. Investors are buying debt from the steadier operating business while watching the parent’s riskier artificial intelligence spending spree in the background. (bloomberg.com) (spglobal.com) The ¥418 billion deal is different from a normal bond because it is a hybrid note, which sits between debt and stock like a ladder with one foot on each rung. SoftBank said on March 30 that rating agencies may treat 50% of that issue as equity because the notes allow deferred interest and rank below senior debt. (group.softbank) That hybrid sale does not give SoftBank a clean pile of fresh money for new projects. SoftBank said the proceeds are mainly for the early redemption of ¥405 billion of older hybrid notes due for a first call in June 2026, so a large part of the exercise is refinancing old obligations with new ones. (group.softbank) (japanir.jp) The pressure point is not whether SoftBank can borrow today. The pressure point is whether repeated borrowing leaves the group with less room if artificial intelligence bets take longer to pay off, and Standard & Poor’s Global Ratings answered that in March by cutting its outlook on SoftBank Group to negative while affirming the rating at BB+. (spglobal.com) (morningstar.com) Standard & Poor’s tied that warning directly to SoftBank’s larger OpenAI commitment. The agency said the extra investment could weaken liquidity, lower the quality of the asset mix, and force SoftBank to rely on asset sales or other easing steps whose timing is still unclear. (spglobal.com) There is a second bill attached to the artificial intelligence buildout: electricity. Reporting on SoftBank’s financing plans said the group and OpenAI had also put $1 billion into SB Energy to help build data-center infrastructure in the United States, which links the debt story to the power needs of artificial intelligence servers. (outlookbusiness.com) So the market is sending SoftBank two messages at the same time. Bond buyers are still showing up in size, but the rating agencies are saying that each new layer of borrowing makes SoftBank more dependent on a future in which OpenAI, data centers, and other artificial intelligence bets start producing cash before the debt bill gets heavier. (theedgesingapore.com) (spglobal.com)