(Bloomberg) — SoftBank Group Corp.\u2019s talks with potential creditors to raise at least $6 billion from a margin loan backed by its OpenAI stake have stalled, people familiar with the matter said, just weeks after the Japanese conglomerate cut its initial target from $10 billion.<\/p>\n
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The company is considering various fundraising options, according to the people, who asked not to be identified discussing private matters. It could still move forward with the margin loan at a later stage, they added.<\/p>\n
It\u2019s unclear why the margin loan discussions stalled. Borrowers and creditors can pause and revisit fundraising discussions for various reasons, and SoftBank hasn\u2019t elaborated on its plans, the people said. SoftBank had secured some $5 billion for the loan before the development, people familiar with the matter said, though it was unclear if those were verbal or written commitments.<\/p>\n
SoftBank declined to comment. The company\u2019s shares declined as much as 9.7% Wednesday.<\/p>\n
The current inaction on the margin loan comes even after some of the potential lenders who had been pitched on it said that they\u2019d started to consider it in a more favorable light, after news last month that the ChatGPT creator was preparing to file for an initial public offering. OpenAI said on Monday that it has filed confidentially for an IPO in the US, joining artificial intelligence rivals in tapping public markets to fund ambitious growth plans. The firm is working with Goldman Sachs Group Inc. and Morgan Stanley on a potential listing as soon as in the fall.<\/p>\n
Markets have witnessed a broader debate in recent months about SoftBank\u2019s commitments of more than $60 billion to OpenAI at a time when recent breakthroughs by rival Anthropic PBC have raised doubts for some investors about the business. Within SoftBank itself, some officials had grown anxious about that commitment.<\/p>\n
Previously some of the potential creditors pitched on the margin loan had expressed concerns about the difficulty of reaching a valuation for an unlisted company like OpenAI. SoftBank had downsized the loan\u2019s initial target size by 40% after facing hesitation from some of the potential lenders, people familiar with the matter said in May.<\/p>\n
\u201cThe margin loan is just one piece of a much larger puzzle, and unless we see a clear deterioration in their ability to raise funds this way, we don\u2019t view it as a standalone red flag,\u201d said Hua Cheng, head of Asia credit research at AllianceBernstein. \u201cThe best\u2011case scenario is an OpenAI IPO this year, with SoftBank offloading part of its stake to pay down debt. That would be consistent with what credit investors want.\u201d<\/p>\n
The Japanese company has been ramping up its broader AI plans. Late last month, it said that it plans to invest as much as \u20ac75 billion ($86.6 billion) to build artificial intelligence data center capacity in France, saying the country is poised to become a top European hub for AI infrastructure.<\/p>\n
Looming in the background is a $40 billion bridge financing that supported the conglomerate\u2019s investments in OpenAI, and which SoftBank must repay in March 2027. SoftBank has said that borrowing would likely be repaid \u201cthrough the utilization of existing assets and other financing measures.\u201d<\/p>\n
More generally SoftBank has a number of potential fundraising options, though it\u2019s unclear if it would opt to use any of them. Those include potential issuance of more bonds, or possibly borrowing against other listed holdings in its portfolio.<\/p>\n
Its stakes include ones in Arm Holdings Plc and Intel Corp., whose shares have jumped 197% and 192%, respectively, so far this year amid the AI boom.<\/p>\n
Even after declines Wednesday, SoftBank Group\u2019s stock has also surged this year and was last up about 45.5% for the period, extending gains in recent weeks after the company reported a jump in quarterly profit due to valuation gains on its OpenAI investment. On June 1, SoftBank overtook Toyota Motor Corp. as Japan\u2019s most valuable company by market capitalization.<\/p>\n
The cost of insuring SoftBank\u2019s debt against credit risks has also dropped in recent weeks. Its credit-default swaps have narrowed by about 61 basis points to 307 from a recent peak above 367 basis points on May 20.<\/p>\n
–With assistance from Janice Huang.<\/p>\n
(Adds share move in 4th paragraph, quote in 8th paragraph.)<\/p>\n
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