SoftBank leans on debt

SoftBank is borrowing in three different ways at once, and that tells you what the artificial intelligence boom looks like when the bills arrive. Its telecom unit’s first euro bond drew more than €4.2 billion of orders, while the parent group is also lining up fresh loans and a new ¥418 billion hybrid bond in Japan. (bloomberg.com, theedgesingapore.com, morningstar.com) The euro deal is coming from SoftBank Corp., the listed Japanese mobile-phone and internet unit, not from the parent holding company that makes the giant investment bets. Investors are still pricing the bond with the parent’s artificial-intelligence spending in mind, because cash raised anywhere inside the SoftBank empire affects how much strain the whole group can carry. (bloomberg.com, techinasia.com) The bond itself is plain enough: two euro-denominated tranches, one due in June 2032 and one due in June 2036. Bloomberg reported initial pricing talk at about 135 to 140 basis points over mid-swaps for the six-year piece and about 170 basis points over mid-swaps for the 10-year piece, which is the market’s way of charging extra for risk. (bloomberg.com) The bigger reason SoftBank needs so much funding is not the phone business. On April 1, 2025, SoftBank Group said it had agreed to invest up to $40 billion more in OpenAI, with SoftBank expecting its own effective commitment to be up to $30 billion after syndicating $10 billion to co-investors. (group.softbank) That same filing said SoftBank and OpenAI had already announced the Stargate Project on January 21, 2025 to build dedicated artificial-intelligence infrastructure in the United States. In plain English, this is not just a bet on software chatbots; it is also a bet on the expensive physical layer underneath them, including chips, servers, power, and data centers. (group.softbank) SoftBank is also using a financing tool called a hybrid bond, which behaves a bit like debt and a bit like equity. The new ¥418 billion issue is a 35-year note, and SoftBank said rating agencies would treat 50% of it like equity, which helps the company look less leveraged even though investors are still lending it money. (morningstar.com) The company said that hybrid issue is mainly meant to repay older hybrid notes at their first optional redemption date in June 2026. That means part of the borrowing spree is new fuel for artificial-intelligence expansion, but part of it is also refinancing old fuel before it gets more expensive. (morningstar.com) SoftBank’s own OpenAI announcement shows why the financing question is so central. The company says it manages loan-to-value below 25% in normal markets, keeps an emergency ceiling of 35%, and tries to hold enough cash to cover bond redemptions for at least the next two years. (group.softbank) That is what makes this story bigger than one bond sale in Europe. Artificial intelligence is now being financed the way telecom networks, buyouts, and infrastructure booms were financed before it: with layered debt, long maturities, rating-agency engineering, and constant attention to how much interest the next dollar of ambition will cost. (bloomberg.com, group.softbank, morningstar.com) If markets stay open, SoftBank can keep rolling that machine forward. If borrowing costs rise or investor appetite cools, the constraint on the artificial-intelligence race may stop being chip supply or model talent and start being the oldest limit in finance: how much debt lenders will tolerate before they ask for a much higher price. (bloomberg.com, group.softbank)