SoftBank's Financing for OpenAI Raises Credit Risk and Plans Overseas Debt
Apollo Global Management is in discussions with SoftBank to increase the net asset value loan secured by Vision Fund II assets from $5.4 billion to $9 billion to further fundraise for OpenAI. The scale is yet to be determined, and both parties declined to comment. This loan was issued in 2021 and was increased by $900 million last year to its current size.
SoftBank has committed $64.6 billion to OpenAI and secured about $10 billion in loans in August by pledging its shares in OpenAI. This week, SoftBank's credit default swaps rose to a three-year high, while it is meeting with investors in New York to discuss issuing $10 billion to $20 billion in overseas high-yield bonds.
There are three layers of financing in parallel: fund net value loans, project equity pledges, and group high-yield bonds. The committed capital for Vision Fund II previously exceeded $100 billion, with Masayoshi Son and SoftBank being the largest contributors. The delay in OpenAI's IPO timeline means that the cash commitments are more reliant on debt rather than equity sales.
Widening credit spreads indicate that the bond market is beginning to price the same exposure: equity narratives continue to be written based on AI growth, while debt is priced based on leverage and collateral concentration. If high-yield bonds are issued, it will shift part of the NAV structure in private credit to public bond investors.
Mechanically, this is an event where private leverage spills over into credit default pricing. Beneficiaries are NAV creditors receiving higher spreads and potential bond underwriters; the pressured party is SoftBank Group's remaining unsecured financing space and the repayment order of other assets in Vision Fund II. Funds are being drawn from the fund portfolio and public debt market to OpenAI's payment account, with the stock and bond markets providing two sets of prices for the same commitment.
Source: Public Information
ABAB AI Insight
SoftBank has divided an unlisted equity into three layers of liabilities: fund level, project level, and group level. The three-year high in CDS is the first market pricing of this division, occurring before bond pricing. The $10 billion high-yield bond roadshow in New York is a wholesale of private credit limits to public bond funds. The later the IPO, the thicker these three layers become.
The capital path is to use debt to maintain the rhythm of the $64.6 billion commitment, avoiding becoming a forced seller in the primary market. Apollo's loan increase is an expansion of an old pipeline, while the bank syndicate's pledged loan is a new pipeline, and bonds represent a broader pipeline. Once collateral is cross-collateralized, any default in one layer will pull the non-OpenAI positions of Vision Fund II into the same repayment table.
This is analogous to SoftBank's asset-backed financing for Vision Fund during 2019-2020, as well as the general practice of private equity using NAV loans to deliver cash to investors early: tools will be pushed to the limit on the largest single bets. The industry is in a leveraged phase where "commitments cannot stop, and exits cannot be made."
Structural judgment belongs to capital concentration. The mechanism involves a few institutions piling risks into an unlisted target, then wholesaling the resulting gaps into loans and bonds; superficially, the number of creditors increases, but the underlying equity remains the same. The rise in CDS reflects the time value, not realized exits.