SoftBank Group drew more than $20 billion in demand for a junk bond sale aimed at funding its investment in OpenAI. Analysts attributed the strong interest to the record-high yields offered on the deal.
Orders topping $20 billion came in for the $11 billion offering during bookbuilding, Bloomberg reported on the 22nd. SoftBank had targeted $10 billion in dollar-denominated notes and 1 billion euros in euro-denominated debt.
What drew investors was the highest yield levels on record. The company set pricing at 8.75% to 8.875% for $1 billion of 3.5-year notes, 9.375% to 9.5% for $4.5 billion of 5.5-year notes and 9.75% to 9.875% for the same amount of 7.5-year notes. All are record highs among SoftBank's dollar bonds.
Proceeds will go toward a $65 billion equity commitment to OpenAI and to mergers and acquisitions. SoftBank has sold nearly $15 billion of bonds this year, making it the largest speculative-grade issuer in the bond market. Both S&P Global and Fitch rate the company BB+.
The yields exceed average levels for issuers with SoftBank's credit rating. The 8.75% low end on the 3.5-year notes is close to the 8.5% average yield on B- rated bonds in the U.S. market. SoftBank's S&P rating of BB+ is the highest speculative-grade tier, several notches above B-. Dollar bonds in the B category yield an average 7.5%, while those in the BB category yield 6.55%, according to Bloomberg indexes.
Funding costs have risen quickly this year for SoftBank and other companies. The yield on its dollar notes maturing in 2031 jumped to 8.2% early this month from 6.7% in January, as widening spreads coincided with rising U.S. Treasury yields.
Even so, SoftBank, led by Chairman Masayoshi Son, is expanding its investment in OpenAI. Son has played down concerns surrounding AI infrastructure spending. Earlier this year, he projected that AI-related industries would account for 20% of global output, or $46 trillion, by 2040.
SoftBank took out a $40 billion bridge loan in March to fund additional investment in OpenAI and recently repaid the remaining $25.9 billion. Last week it secured nearly $21 billion in new borrowing capacity. It raised a margin loan backed by shares in chip unit Arm by $5 billion to $25 billion, and added $450 million to an existing credit line to bring it to $6.5 billion.
