According to sources, SoftBank Group (SFTBY) is applying for a $10 billion loan using its stake in U.S. artificial intelligence giant OpenAI as collateral, aiming to further expand its presence in the AI sector. The two-year margin loan would allow the Japanese conglomerate to extend the borrowing period by an additional year. A margin loan is an arrangement in which a company secures a loan by using its own assets, such as stocks, as collateral. A representative for SoftBank declined to comment.
To solidify its critical position in the global AI race, SoftBank has aggressively taken on debt and made substantial investments in OpenAI, the developer of ChatGPT. SoftBank recently invested an additional $30 billion in the U.S. company, having already injected over $30 billion previously. Last month, SoftBank signed a $40 billion loan agreement—its largest U.S. dollar-denominated loan to date—with part of the funds earmarked for subsequent investments.
SoftBank’s massive investments in artificial intelligence, coupled with the rising debt incurred to finance them, have unsettled market observers. In March, S&P Global Ratings downgraded SoftBank’s credit rating outlook from “stable” to “negative,” citing concerns that the investment in OpenAI could impair the company’s liquidity and asset credit quality. However, recent signs suggest that, as long as the price is right, creditors remain willing to provide SoftBank with funding for its OpenAI investments.
According to sources, SoftBank has not yet finalized the margin loan, and details could still change. The initial interest rate is proposed to be approximately 425 basis points above the Secured Overnight Financing Rate (SOFR), which at current SOFR levels would translate to an interest rate of around 7.88%. SoftBank is no stranger to margin loans; as of November last year, the company had expanded a margin loan secured by its shares of Arm Holdings to $20 billion. Additionally, SoftBank reportedly holds hundreds of billions of dollars in equity stakes in various companies, including T-Mobile US (TMUS), Intel (INTC), and ByteDance, and could support its financial position by reducing those holdings.
