(Sept 18): SoftBank Group Corp has increased its margin loan backed by shares of its chip unit Arm Holdings Plc by US$5 billion (RM20.4 billion) to US$25 billion, according to people familiar with the matter, as the conglomerate finds ways to fund its expanding investments in artificial intelligence.
The Japanese investment company renegotiated the terms and signed a deal with creditors this month, said the people, who asked not to be identified discussing private information.
It’s the third time SoftBank is upsizing its margin loan using Arm shares as founder Masayoshi Son needs billions of dollars to fund his growing AI investments, including a nearly US$65 billion commitment to ChatGPT creator OpenAI.
SoftBank is among tech giants including Oracle Corp and Meta Platforms Inc that are pouring unprecedented amounts of capital into AI technologies and infrastructure. But investors are getting increasingly worried about the surge in Son’s multibillion-dollar AI projects where the revenue payoff is largely uncertain.
SoftBank declined to comment.
The margin loan — where a borrower uses investments like stocks as collateral — began as an US$8.5 billion facility in 2023. It was subsequently increased to US$13.5 billion in 2024 and then to US$20 billion last year.
As of May, SoftBank’s loan was secured by 769 million shares of Arm, representing a 72% stake in the chip designer, according to company filings. SoftBank owns almost 90% of Arm.
SoftBank had drawn US$20 billion from the facility as of December, with the loan set to expire in September 2027. The loan remains priced at an interest margin of about 225 basis points over the benchmark Secured Overnight Financing Rate and a credit adjustment spread of 25 basis points, some of the people said.
The deal drew strong demand, helped by the 142% spike in Arm’s share price this year. SoftBank was initially looking to increase the facility by US$3 billion to US$5 billion, but received about US$7 billion in demand from lenders, the people said. SoftBank could boost the loan further if Arm shares continue to rise, they added.
SoftBank has been on an acquisition spree, led by its OpenAI investment. Other recent purchases include ABB Ltd’s industrial robotics business for US$5.4 billion and data center-focused private equity firm DigitalBridge Group Inc for about US$3 billion in cash.
To finance those deals, SoftBank has been replacing its shorter-term loans with debt carrying longer maturities to strengthen its financial position. SoftBank repaid this week the entire outstanding balance of US$25.9 billion on a US$40 billion one-year loan to fund its investment in OpenAI.
SoftBank also last month secured a US$10 billion two-year loan using its OpenAI stake from lenders including Apollo Global Management Inc. Apollo is in talks with SoftBank about boosting the size of a loan to US$9 billion from US$5.4 billion to help the Japanese firm fund its OpenAI investment, Bloomberg reported this week.
Among tech giants, Oracle is considered to have one of the highest exposure to spending risk among the major AI players, which is overshadowing robust growth in its cloud-computing division. Meta’s capital expenditure has severely diminished its free cash flow, which is projected to turn negative in the third quarter.
For Son, his growing list of ambitions includes aggressive data center expansion in the US and France. SB Energy Inc, SoftBank’s US unit, is developing 8.8 gigawatts of data center capacity across America that is estimated to require US$174 billion in capital spending. SoftBank has also announced plans to build a five-gigawatt data center in France.
Uploaded by Evelyn Chan