SoftBank draws over $20B of early interest in junk bond: Report

Logo of SoftBank Group

SoftBank Group Corp. has drawn more than $20 billion of preliminary demand for what’s shaping up to be one of the biggest junk bond deals ever, Bloomberg reported, citing people familiar with the matter as saying.

This came as investors rush to capture record yields likely to be offered to help fund the firm’s investments in OpenAI.

The potential interest reflects early, non-binding indications from investors and serves as an initial gauge ahead of pricing, which is still expected Thursday, Bloomberg added.

Discussions have taken place around a potential yield of approximately 10% for the longer-dated dollar tranche, consisting of 7.5-year bonds, while a yield of around 8.5% was discussed for the longer-dated euro-denominated tranche, which matures in six years. If priced at these levels, they would represent record yields for the respective currencies and maturities.

What does this mean? The massive investor demand reflects confidence in SoftBank’s ability to repay its debt despite its sub-investment-grade (+BB) credit rating. However, the high yields highlight growing market concerns over the hefty financing costs of artificial intelligence projects and the delay in OpenAI’s potential stock-market listing.