SoftBank’s OpenAI Bet Just Got $11 Billion Bigger
Synopsis
SoftBank is raising more than $11 billion through dollar and euro bonds as it prepares to make another $10 billion payment into OpenAI.
Key Highlights
- SoftBank Group issued more than $11 billion worth of bonds to finance its investment in OpenAI.
- The deal consists of US dollar bonds totalling $10bn in total and €1 billion in euro-denominated bonds.
- The funds will be used to help SoftBank (OTC: SFTBY) pay the third payment of its following OpenAI investment, which also costs $10 billion.
- The new bonds will repay a $10 billion bridge loan that SoftBank obtained for the investment.
- Pricing of the bonds is scheduled for September 24, while settlement is set for September 29.
SoftBank Group is selling over $11 billion of new bonds ahead of a fresh multibillion-dollar investment in OpenAI.
SoftBank has announced $10 billion in US dollar-denominated senior unsecured notes and €1 billion of euro-denominated notes, according to a term sheet seen by Reuters. Most of those funds will directly cover the next $10 billion payment SoftBank is due to pay into OpenAI.
The investment is the third of SoftBank’s follow-on investments into OpenAI, and will reportedly close on October 1. That makes the bond sale a key part of SoftBank’s strategy to make that payment.
Five Different Bonds
This new debt has several maturity periods. The dollar bonds will be maturing in 3.5 years, 5.5 years and 7.5 years. They will be four- and six-year euro-denominated bonds, the term sheet said. Pricing for the bonds is slated for Sept. 24 and settlement on Sept. 29.
The bond offering is being lead-managed by Citigroup and JPMorgan. SoftBank was unable to be reached immediately for comment due to a holiday in Japan. (Reuters)
SoftBank Substitutes $10 Billion Bridge Credit
Prior to the OpenAI investment, SoftBank had already obtained a $10B bridge loan that would be its equity of what it ends up funding on OpenAI.
This new bond offering will instead act to replace the bridge financing. SoftBank isn’t looking at short-term loans but is raising longer-maturity debt from the bond market. Per the term sheet, proceeds will also be used for general corporate purposes.
The step highlights how SoftBank is orchestrating the financial support required to sustain its sizable funding for OpenAI whilst diversifying the maturities of that capital.
OpenAI Is Strategic to SoftBank, Here’s Why
OpenAI has emerged as one of SoftBank’s most high-profile investment targets, with the Japanese group continuing to pour funds into AI.
That last $10 billion payout is more a follow-on investment from SoftBank and not an entirely new commitment. The company is currently working on arranging the financing to pay for the final third tranche.
The timing is also as OpenAI still needs billions more in capital for compute and infrastructure. OpenAI predicts cash burn of approximately $278 billion from 2026 to 2030 as it increases spending on computing and infrastructure, Reuters reported last month, citing the Financial Times.
What does this mean for entrepreneurs/businesses in Australia?
The SoftBank OpenAI bonds illustrate how much capital is being constructed around the AI market for Australian entrepreneurs and companies. Alternative debt and other forms of leverage financing are increasingly being used to finance big technology investments, with companies and their investors having a variety of options for funding costly AI infrastructure and expansion.
It also points to the large amount of financing that AI natural products are going to entail as firms grow. The 10 billion SoftBank Bond OpenAI funding, the SoftBank Bridge Loan OpenAI arrangement and the broader new age of SoftBank OpenAI investing structure show how significant investors are orchestrating huge tech wagers over multiple stages. For businesses in Australia looking into AI, it should be a reminder that capital access can become an integral aspect of scaling technology past the initial exploration phase.
Source: Reuters
At Inspirepreneurs Magazine, covering entrepreneurship, business failures, and the human stories behind the world's most ambitious founders. She writes at the intersection of strategy and storytelling.
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