SoftBank Secures $10 Billion Loan Backed by OpenAI Stake

SoftBank Group Corp. has secured a $10 billion margin loan backed by its stake in OpenAI, according to a company announcement on August 6. The two-year loan was arranged with several financial institutions, including Goldman Sachs Bank USA and JPMorgan Chase Bank NA. SoftBank plans to draw down the loan this month for general corporate purposes and investments through its Vision Fund II-2.

Key Details

The loan agreement stipulates that SoftBank must post cash or repay early if the value of OpenAI's preferred shares declines sharply. This margin loan follows a record $40 billion bridge loan secured by SoftBank for its investments in OpenAI, which attracted a new group of 21 lenders last month. SoftBank's total investment in OpenAI is expected to reach nearly $65 billion by October, funded partly by loans as investor concerns about rising debt levels mount.

Background

In its fiscal first quarter, SoftBank reported a net income decline of 18% to 347.3 billion yen (approximately $2.2 billion), which was better than market expectations. The company benefited from gains in its chip stock holdings, particularly from Intel, whose shares more than tripled during the quarter. This offset declines in the value of OpenAI and other investments within SoftBank's Vision Fund portfolio, including a drop in the share price of its payments app, PayPay. The fluctuating valuations of AI companies, including OpenAI and its competitor Anthropic, have raised questions about the sustainability of their business models amid increasing competition from lower-cost Chinese rivals.

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Based on reporting by: livemint.com, businesstimes.com.sg