SoftBank Group founder Masayoshi Son has long made clear that artificial intelligence is the group's core future bet. To raise funds for this ambitious strategy, SoftBank is tapping global credit markets with unprecedented force. The company last week completed an $11.1 billion high-yield bond issuance, setting a record for the global corporate junk bond market. The financing is largely intended to replace the $40 billion bridge loan SoftBank previously obtained to invest in OpenAI. Faced with enormous funding needs, SoftBank ultimately decided to return to the U.S. institutional bond market, issuing securities to deep-pocketed American institutional investors. This also marks the company's first fundraising of this kind in the U.S. market in more than a decade.

To access the roughly $23 trillion U.S. bond and other debt securities market, SoftBank's offering needed to meet the conditions of Rule 144A under the U.S. Securities and Exchange Commission (SEC). Over the past decade, SoftBank's smaller overseas bond financings mainly used the Regulation S framework, offering only to investors outside the United States. To this end, SoftBank and its legal team prepared for months, with one key question being whether SoftBank would be deemed an "investment company" under U.S. law. That designation could directly affect its ability to enter U.S. capital markets.

Under the U.S. Investment Company Act of 1940, if a company holds investment securities exceeding 40% of certain assets, it may be classified as an investment company unless it meets relevant exemptions. Once a foreign company falls into this category, it may need special SEC approval before issuing securities to U.S. investors. In its bond offering memorandum, SoftBank said it believes its investment securities account for less than 40% of its unconsolidated assets and positioned itself as a "technology-focused strategic holding company." People familiar with the matter said the final judgment was based on a comprehensive test of SoftBank's overall business and assets. One important factor was that SoftBank's roughly 86% stake in chip designer Arm was classified as an operating subsidiary rather than a passive investment security, helping SoftBank avoid being categorized as an investment company under the Investment Company Act. SoftBank declined to comment.

Arm's share price rebound creates a window for the massive bond sale

Just a few months ago, whether SoftBank could successfully complete such a huge bond financing was still highly uncertain. Affected by a broader pullback in AI-related stocks, rising valuation concerns, and unease among some investors over SoftBank's increasing bets on OpenAI, SoftBank's share price once plunged nearly 50% from early June to late July. Since then, SoftBank's shares have rebounded markedly, gaining about 42% year to date. People familiar with the matter said Arm's stronger share price in particular provided important support for SoftBank and gave the company an opportunity to test bond market demand. SoftBank executives then launched an intensive global investor roadshow. In early September, they went to London to meet major European investors and attend leveraged finance conferences hosted by Goldman Sachs and JPMorgan. After that, SoftBank Chief Financial Officer Yoshimitsu Goto and other executives flew to New York to hold talks with investors at Citigroup's offices to gauge market interest in a potential junk bond issuance. These meetings quickly drew investor responses. People familiar with the matter said many institutions subsequently submitted letters of intent to underwriting banks, indicating they might participate in subscriptions if the deal launched. However, U.S. investors still raised numerous questions about SoftBank's complex corporate structure, future investment plans and the progress of its data center projects.

Financing against the backdrop of the AI "bubble" debate

The market environment for SoftBank's financing was also less than ideal. U.S. Treasury yields climbed sharply, and debate intensified over a debt-fueled "AI bubble." At the same time, several AI industry leaders began warning about the potential safety risks of advanced artificial intelligence models and called for slowing the development of frontier models. OpenAI CEO Sam Altman also said the company would not go public this year, meaning investors waiting for an OpenAI exit channel still need to remain patient. For SoftBank, which has already placed huge capital bets on OpenAI, this also increases uncertainty over the valuation and monetization prospects of its portfolio. Resona Holdings strategist Hiroki Takei noted that for investors in AI-related bonds, the risk is not only the extreme scenario of the AI boom collapsing entirely. He said that if the current model of "investment upfront, commercialization lagging" continues, massive AI capital expenditure could keep eroding corporate free cash flow, making companies more reliant on external financing and refinancing. Once AI demand then slows, credit spreads could widen significantly. At this stage, however, many investors still view these scenarios more as risks to consider in due diligence rather than an imminent industry reversal, so the global AI debt financing boom continues.

To push forward SoftBank's massive deal, banking teams in Asia and Europe even worked through the weekend before issuance. People familiar with the matter said the relevant meetings spanned three time zones, with staff in London and Tokyo communicating with U.S. investors overnight.

Nearly 10% yields ultimately attracted investors

New complications also emerged during the issuance process. News that SoftBank-backed data center service provider SB Energy had delayed its initial public offering (IPO) sparked further investor concerns. Underwriting banks then received a flood of questions about OpenAI's listing timeline, SB Energy's postponed IPO and what these changes meant for the assets SoftBank holds. In the end, the high yields SoftBank offered became the key to attracting investors. The longest tranche in the offering was 7.5-year debt, ultimately priced to yield 9.75%, close to double digits. S&P Global Ratings and Fitch both assigned SoftBank a "BB+" rating, the highest level within the two agencies' non-investment-grade categories. SoftBank mainly measures its debt level through loan-to-value (LTV), calculated as net debt as a proportion of the value of its equity holdings. The company generally commits to keeping LTV below 25%, allowing it to rise to 35% only under special circumstances. As of the end of June this year, that metric was only 13%. Satoru Aoyama, senior director of Asia-Pacific corporate ratings at Fitch, said investors understand the risks of SoftBank as a BB+ issuer, and bond yields close to 10% are already near the return levels of equity investments. At the same time, however, SoftBank did not issue bonds with maturities as long as 30 years, and the company's financial discipline in keeping LTV low also provides creditors with some indirect protection. SoftBank's record bond issuance is the latest example of how the AI investment boom is reshaping global credit markets. As data centers, chips, computing infrastructure and AI model development consume increasingly enormous amounts of capital, technology companies are becoming more dependent on debt financing. Aoyama said that although the market is still debating the risks of excessive borrowing in the AI industry, financing demand is clearly growing rapidly and has already spread across the entire AI supply chain.