SoftBank Plans Record $6.3 Billion Retail Bond Sale in Japan

SoftBank Group Corp. plans a record ¥1 trillion ($6.3 billion) retail bond sale, the biggest by any issuer in Japan, as the conglomerate raises funds for its investment commitments to OpenAI.

The 7-year bonds are expected to be priced on Sept. 4, with an indicative coupon range of 4.3% to 4.9%, according to a company filing.

SoftBank’s move is the latest in a global rush to amass funds in the hyper-competitive race for global leadership in artificial intelligence. On Monday, Alibaba Group Holding Ltd. raised HK$80 billion in Hong Kong’s biggest secondary share sale on record to help it fund its efforts to pour money into chips, data centers and large-language models. Alphabet Inc., Meta Platforms Inc., Microsoft Corp. and Amazon.com Inc. — the four largest players in the data center race — have pledged nearly $2.4 trillion in AI-related spending over the coming years.

SoftBank has committed more than $60 billion to invest in the ChatGPT developer and has been accelerating investments in data centers as it seeks to expand computing capacity. The spending comes as questions about how to monetize the technology persist alongside warnings about overcapacity, growing corporate debt and the circular nature of many AI fundraising deals.

“The company is betting that retail investors will buy a product offering an attractive yield, and it appears confident it can tap demand at a time when there are few fixed-income products that can beat inflation,” said Yuuki Fukumoto, senior financial researcher at NLI Research Institute. “Banks are finding it difficult to take on the risk given weak deposit growth, the credit rating and the seven-year duration, leaving the deal more reliant on retail investors.”

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The offering will be SoftBank’s third retail bond sale this year, after it raised ¥418 billion in April and ¥260 billion in June. The new offering is likely to price toward the upper end of a 4.3-4.9% indicative coupon, according to Sharon Chen, a credit analyst at Bloomberg Intelligence. The company faces a shortfall exceeding $20 billion even after this bond issue, signaling a high likelihood of offshore bond issuance in the near term, she added.

SoftBank has also considered a margin loan backed by its OpenAI stake, cutting its fundraising target to about $6 billion from $10 billion.

The bond sale also comes after S&P Global Ratings revised its outlook on SoftBank to stable from negative on July 16, saying the company’s key financial ratios had improved more than previously expected. S&P affirmed SoftBank’s long-term issuer credit rating at BB+, one notch below investment grade.