SoftBank Boosts Credit Line to $6.5 Billion as AI Debts Mount

SoftBank Group Corp. secured an additional $450 million to increase the size of an existing credit line to $6.5 billion, people familiar with the matter said, giving the Japanese conglomerate more financial flexibility as it expands investments in artificial intelligence.

The previous facility equivalent to $6.05 billion was due to expire this month, and SoftBank will have another year to draw down on the expanded amount, according to the people who asked not to be identified because the information is private. It’s unclear whether SoftBank has tapped the new line or if it plans to do so.

SoftBank is at the epicenter of debates about the future of debt-fueled bets on AI, at a time when market volatility has increased amid safety warnings. One of the world’s biggest investors in the technology, the conglomerate has recently conducted a flurry of deals to finance its push that includes an expanded stake in AI giant OpenAI. In one of the latest examples, SoftBank increased its margin loan backed by shares of its chip unit Arm Holdings Plc by $5 billion to $25 billion.

There are currently more than 20 banks involved for the expanded credit line, the people said. The new deal carries an interest margin of 210 basis points over the benchmark Secured Overnight Financing Rate, they added.

A representative from SoftBank declined to comment.

Commitment or credit lines are revolving loan facilities that lenders make available for a set period. Companies often treat them as liquidity backstops and do not necessarily draw on the funds immediately.

The credit line adds to a wave of debt-raising activities tied to SoftBank’s bet on OpenAI and more broadly, on artificial intelligence. Recent financings include an $11.87 billion term loan and a $10 billion loan backed by its OpenAI stake, despite concerns about growing risks in the sector.

Founded and led by billionaire Masayoshi Son, SoftBank is slated to invest close to $65 billion in OpenAI by October.

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SoftBank also signed a $40 billion bridge loan earlier this year to finance its OpenAI investments. The Japanese firm paid the entire outstanding balance of $25.9 billion on that borrowing this week.

The company has drawn down $30 billion from the bridge loan but it hasn’t given any guidance if it will take the remaining $10 billion. The next time it can do so is in early October, the people said.

The company has also been meeting with fixed-income investors in New York this week to test appetite for a possible junk bond offering that could total $10 billion to $20 billion, people familiar with those discussions have said. A deal could come to the market as early as next week, according to other people briefed on the matter.

“We have investor meetings to provide an update in New York on a non-deal basis. Nothing has been determined on bond issuance,” SoftBank said when asked about the meeting.

Separately, Apollo Global Management Inc. is in talks with SoftBank about boosting the size of a loan to $9 billion from $5.4 billion to help the Japanese firm finance its investment in OpenAI, people familiar with the deal said earlier this week.

Debate has been intensifying over the pace of AI development and the risks associated with increasingly powerful systems. Some executives are now voicing the need to slow the pace of development due to escalating risks from the technology. OpenAI Chief Executive Officer Sam Altman has said that his company wouldn’t proceed with a public offering this year as it addresses safety-related concerns.

The cost of insuring SoftBank’s debt against default has climbed this year, with credit-default swaps marking a three-year high earlier this week.