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SoftBank’s OpenAI ambition is far too grand for banks
SoftBank Group is reviving high-yield dollar bonds as it seeks to secure its investment in OpenAI, intending to invest $30 billion by year-end. The company is offering $2 billion in bonds with yields between 8.5% and 8.625%, as it seeks attractive financing amid its ambitious growth plans.
Key points
- SoftBank plans to issue $2 billion in high-yield bonds with yields of 8.5%-8.625%.
- These bonds allow for deferred coupon payments and are subordinate to existing debt.
- The bonds are being issued to finance SoftBank's ambitions in OpenAI, following a $30 billion funding pledge.
- The first reset date for the bonds is set for 2035, while a 2035 bond currently trades at a lower yield of 6.8%.
- So far, SoftBank has invested $7.5 billion in OpenAI, with additional investments pending.
Why it matters
- SoftBank's approach reflects a trend in IT financing where companies seek alternative high-yield capital sources.
- Investor interest in AI startups like OpenAI has surged, paralleling an increase in tech valuations.
- In 2023, major investments in AI indicated a growing market, leading to historical comparisons of tech bubbles.
SoftBank's aggressive investment strategy in OpenAI highlights the ongoing competition and potential risks in the rapidly evolving AI tech space, indicating a trend towards high-yield financing in pursuit of innovation.