① SoftBank Group plans to issue seven-year bonds with a coupon rate of 3.98%, raising approximately 500 billion yen. This bond has the highest interest rate in 15 years. ② The rising interest rate has attracted the attention of retail investors, with more and more retail investors flocking to the corporate bond market in search of higher returns. ③ Part of the funds raised by SoftBank in this bond issuance is expected to be used to repay the bridging loan generated from its investment in OpenAI.
According to the latest disclosed terms, SoftBank Group will issue a bond with a coupon rate of 3.98% to retail investors, aiming to raise approximately 500 billion yen (about US$3.2 billion) – which would be the highest-interest-rate senior bond issued by the company in yen in more than 15 years.
According to the company’s term sheet released on Wednesday (November 26), the interest rate for the unsecured seven-year bonds is set near the upper end of the previously announced range of 3.5% to 4.1%.
The last time the company issued a similar bond with such a high interest rate was in 2009, when the interest rate was 4.52%.
Retail investors seek high returns
Since the Bank of Japan ended its negative interest rate policy in March 2024, retail investors have increasingly flocked to the corporate bond market in search of higher returns.
Amid rising inflation and market concerns about Prime Minister Sanae Takaichi's fiscal spending plans, yields on Japanese government bonds, which serve as a benchmark for corporate bonds, are climbing steadily.
Nomura Securities According to Kazuma Ogino, a senior credit analyst at the firm, as corporate bond issuance has reached a record high, it has become more difficult for companies to issue bonds to institutional investors. However, rising bond yields have attracted the attention of retail investors, who have flocked to the corporate bond market.
Ogino also mentioned that SoftBank is one of Japan's largest bond issuers.
Financing demand remains strong
Although higher bond yields have increased borrowing costs for businesses, their demand for financing remains strong.
According to compiled data, Japanese companies have raised a record 2.79 trillion yen through yen-denominated retail bonds by 2025, surpassing last year's peak.
It is understood that a portion of the funds raised by SoftBank through this bond issuance will be used to repay the bridging loan incurred from its investment in OpenAI.
Earlier this month, SoftBank Group reported its second-quarter net profit, exceeding analysts' expectations, due to its success in artificial intelligence. Investments in the field have yielded returns. One of the main drivers of this growth is its Vision Fund, which has benefited from rising valuations of unlisted AI- related assets such as OpenAI.
Although SoftBank has made huge bets in the field of artificial intelligence and has achieved certain returns, its stock price has fallen by about 30% in the past month, mainly due to the cooling down of global AI concept stocks.
In addition, the company’s credit default swap spread (a measure of credit risk) has widened to its highest level in about four months.
Ogino of Nomura commented, "Global opinions on 'AI-related investments' are mixed, ranging from optimistic to cautious, and this attitude is influencing the secondary market."
(Article source: CLS)
