One company has accounted for 63.4 percent of the high-yield corporate bond market across Asia-Pacific and Japan this year. On Thursday SoftBank added to that share, raising $11.1 billion across dollar and euro notes — the largest high-yield corporate bond sale ever recorded anywhere, past the $10.9 billion Numericable sold in 2014, according to LSEG data cited by Reuters. Ten billion of it is dollar senior unsecured paper across three maturities, the rest euro-denominated. It settles on the 29th.
The money goes out again almost immediately. Around October 1, SoftBank owes $10 billion, the third and last instalment of a $30 billion follow-on investment in OpenAI it agreed to in February. When that clears, its total sits near $64.6 billion for a stake of roughly 13 percent. So the transaction is borrowed money at a fixed coupon, spent on equity in a private company — and those two instruments pay in completely different shapes. The market's current price for lending to SoftBank is around 8 percent; its 2031 dollar bond was yielding 8.2 percent earlier this month. Whatever OpenAI turns out to be worth, the lenders get their coupon. Everything above it belongs to the shareholder.
And whatever it turns out not to be worth lands on the same lenders, who are senior unsecured creditors of a holding company whose defining asset would be the thing that disappointed. There is no factory behind this paper. There is a position, alongside other positions already pledged — SoftBank took a $10 billion loan against its Arm and OpenAI holdings earlier in the year, and has been selling assets besides.
Except this looks less like a clever structure the closer you get to why it was needed. SoftBank had been expecting cash from two public listings — OpenAI's own, and that of SB Energy, its data-centre subsidiary. Both were set to launch as early as this month, and both delayed. The equity money did not arrive, so debt money went in its place. Lenders are charging for the switch, too: that 2031 bond was yielding as little as 6.7 percent in January, which means the market has marked SoftBank a point and a half worse in nine months. Shares still rose more than 7 percent on Thursday, when Tokyo reopened after a three-day holiday.
Which brings the thing back to the 63.4 percent. SoftBank has sold $14.6 billion of high-yield bonds this year and is the largest junk-rated corporate borrower in the world. An investor in Asia who wants to hold the asset class is holding mostly one issuer, and that issuer is increasingly one position in one private company in California.
The high-yield market exists so that money can be lent to many risky businesses rather than a single one. Across an entire region this year, it has mostly been a way to lend to a single one.
Whatever OpenAI turns out to be worth, the lenders get their coupon.
